Quantity flexibility contracts counter double marginalization by giving the retailer the ability to modify the order based on improved forecasts closer to the point of sale.

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Quantity flexibility contracts allow retailers to adjust their orders based on more accurate demand forecasts, which can help counter the effects of double marginalization. This is because the retailer can avoid over-ordering and having excess inventory, which would lead to higher inventory costs and potentially lower profits. This flexibility allows both the retailer and the supplier to benefit from better coordination and more efficient supply chain management.

Quantity Flexibility Contracts Counter Double Marginalization by Giving the Retailer