Effects of demand uncertainty reduction on the selection of financing approach in a capital-constrained supply chain

Jia Shi, Qiang Li, Lap Keung Chu and Yuan Shi

Transportation Research Part E: Logistics and Transportation Review, 2021, vol. 148, issue C

Abstract: This study investigates how demand uncertainty reduction (DUR) affects the decisional dynamics within a supply chain, which comprises a supplier and a capital-constrained retailer, who chooses between bank credit and trade credit financing. A comprehensive scenario analysis suggests the retailer should accept trade credit when DUR is high, trade credit risk premium is moderate, and wholesale price is exogenous and low. However, the retailer should adopt trade credit only when both DUR and production cost are not high, and wholesale price is set endogenously. We further relax the assumption on the bank’s risk attitude and find most results still hold.

Keywords: Capital constraint; Demand uncertainty reduction (DUR); Game theory; Financing approach; Supply chain finance (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (9)

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DOI: 10.1016/j.tre.2021.102266

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