Quantity Discounts: An Overview and Practical Guide for Buyers and Sellers

Sellers commonly provide price discounts for large orders; in fact, quantity discounts have existed as ubiquitous tools of commerce for hundreds of years. In some industries today, quantity discounts are more common than not in business-to-business transactions. For example, large discount retailers demand price breaks from their suppliers, and they typically then pass on a portion of the savings to final consumers. Practitioners face the issue from two sides. For sellers, what form of quantity discounts makes the most sense, and how should the discounts be priced? What role should quantity discounts play in the larger contract negotiation scheme? For buyers, how many units should be ordered when faced with a quantity discount schedule? And under what conditions should a buyer take the lead and attempt to negotiate a discount schedule from its supplier?

In this monograph, the authors critically review the existing quantity discount literature — particularly emphasizing the differences between historical academic focus and practical applications, as well as identifying areas that are still under-developed. They provide, in one location, the equations and major solution algorithms for the most popular and relevant quantity discount scenarios from both the buyer's and seller's perspectives.