Selling to the News Vendor

Consider selling to a news vendor. A manufacturer markets a product through a retailer who has one opportunity to order before demand is realized. Because of characteristics of the product, norms of the industry, or aspects of the manufacturer-retailer relationship, the manufacturer refuse to take back any unsold product. Instead, transactions are governed by a price-only contract. The manufacturer posts a per-unit wholesale price and sells the retailer any quantity he desires at that price. The retailer places and pays for his order before seeing demand. He then re-sells the good, keeps all realized revenue, but is solely responsible from salvaging unsold items