Which contracts create information distortion that result in excess inventory in the supply chain and a greater mismatch of supply and demand?

Question

Quizplus · Accepted Answer

Buyback or returns contracts and revenue-sharing contracts can create information distortion that results in excess inventory in the supply chain and a greater mismatch of supply and demand. Buyback or returns contracts allow the buyer to return unsold products to the seller, which can lead to the seller overproducing in order to meet potential returns. Revenue-sharing contracts, in which the supplier shares in the profits of the buyer, can lead to the supplier overproducing in order to increase their share of the profits.

Which Contracts Create Information Distortion That Result in Excess Inventory