Consider a buying firm and a supplier negotiating terms for a contract. Suppose the Marginal Benefit to the buying firm of additional contract provisions in a contract (x) to the firm is: MB = 20,000 – 400x. Suppose the Marginal Cost to the buying firm of additional contract provision to the firm is: MC = 100x. What is the optimal number of contract provisions?

Consider a buying firm and a supplier negotiating terms for a contract. Suppose the Marginal Benefit to the buying firm of additional contract provisions in a contract (x) to the firm is: MB = 20,000 – 400x. Suppose the Marginal Cost to the buying firm of additional contract provision to the firm is: MC = 100x. What is the optimal number of contract provisions?

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section: Chapter Questions

Problem 36P

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