Quantity discounts can coordinate supply chain costs if the supplier has large fixed costs per lot.

Question

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Quantity discounts incentivize the buyer to order larger quantities at once, which can help the supplier spread out their fixed costs (such as setup, production, or transportation) over more units. This can lead to lower costs per unit for both parties and better coordination within the supply chain.

Quantity Discounts Can Coordinate Supply Chain Costs If the Supplier