Retailer
Retail price p775.00$
Demand 450,000
Profit 101,250,000$
Orange Company
Wholesale price 550.00$
Cost 100.00$
Profit 202,500,000$
Retailer
Retail price p755.00$
Demand 490,000
Profit 120,050,000$
Discount passed
along by retailer
20.00$
Orange Company
after discount
510.00$
Cost 100.00$
Profit 200,900,000$
We start with the optimal scenario where the retailer tries to maximize
his profits and Orange theirs. Each prices to maximize their profits.
We now consider the case where Orange offers a $40 discount relative
to their price in Cell B8 and see how the retailer adjusts retail price to
maximize profits.