Abstract: A decentralized supply chain consisting of two independent roles is considered, i.e., the manufacturer and retailer. Constrained by a quantity flexibility contract, the retailer can reduce the uncertainties in demand by way of updating the demand forecast information in accordance to Bayesian procedure. A collaborative contract model with quantity flexibility is thus developed to stimulate both parties, with an optimum decision provided for the retailer to determine the upper limit of ordering quantity or ordering flexibility. The distribution of profits between both parties is also discussed. Simulation results indicated that the quantity flexibility contract based on Bayesian updates can improve the accuracy of demand forecasting and performance of supply chain operation. By negotiation and cooperation, both parties will attain win-win goal in accordance to the profit distribution coefficient which is accepted by both parties.