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In this paper we consider a two-stage ordering problem with a buyer's minimum commitment quantity contract. Under the contract the buyer is required to give a minimum-commitment quantity. Then the manufacturer has the obligations to supply the minimum-commitment quantity and to provide a shortage compensation policy to the buyer. We formulate a dynamic optimization model to determine the manufacturer's two stage order quantities for maximizing the expected profit. The conditions for thedoi:10.4236/ajor.2011.13012 fatcat:yjmvx4kj5zbrbmzr3pa3rlzlmu