The supply chain effects on order strategy of cross-shareholdings

Desheng Wu, Chenghao Zhang, Yuchen Pan and Alexandre Dolgui ()
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Desheng Wu: UCAS - University of Chinese Academy of Sciences [Beijing] - CAS - Chinese Academy of Sciences [Beijing]
Chenghao Zhang: UCAS - University of Chinese Academy of Sciences [Beijing] - CAS - Chinese Academy of Sciences [Beijing]
Yuchen Pan: Renmin University of China = Université Renmin de Chine
Alexandre Dolgui: LS2N - Laboratoire des Sciences du Numérique de Nantes - UN UFR ST - Université de Nantes - UFR des Sciences et des Techniques - UN - Université de Nantes - ECN - École Centrale de Nantes - CNRS - Centre National de la Recherche Scientifique - IMT Atlantique - IMT Atlantique - IMT - Institut Mines-Télécom [Paris], IMT Atlantique - DAPI - Département Automatique, Productique et Informatique - IMT Atlantique - IMT Atlantique - IMT - Institut Mines-Télécom [Paris], LS2N - équipe SLP - Systèmes Logistiques et de Production - LS2N - Laboratoire des Sciences du Numérique de Nantes - UN UFR ST - Université de Nantes - UFR des Sciences et des Techniques - UN - Université de Nantes - ECN - École Centrale de Nantes - CNRS - Centre National de la Recherche Scientifique - IMT Atlantique - IMT Atlantique - IMT - Institut Mines-Télécom [Paris]

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Abstract: This study examines the joint impact of the vertical cross-shareholdings and external financing, including trade credit and bank loans, on the order strategy of a capital-constrained retailer. We set the target retailer and his supplier, which are connected with vertical cross-shareholdings, in the extended Cournot and Stackelberg game. The capital-constrained retailer could raise external financing when he has exhausted his own cash. Besides, the retailer may be faced with the random shock result from the other business. We use optimal response function to model how the capital-constrained retailer determines his order quantity under cross-shareholdings in response to different market conditions (such as his own cash level and other competitor's order strategy). We find that, the retailer orders more under cross-shareholdings if the retailer is well-funded with his own cash or external financing, resulting in a win-win situation for the supplier and retailer. However, if the retailer has run out of all his cash and credit, the cross-shareholdings have no effect on the retailer's order strategy. Thus, it helps the capital-constrained retailer to acquire competitive advantage that he could be well-funded with external financing under cross-shareholdings.

Keywords: Cross-shareholdings; Stackelberg game (search for similar items in EconPapers)
Date: 2021-04-05
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Published in International Journal of Production Research, 2021, 59 (22), pp.6848-6863. ⟨10.1080/00207543.2020.1828639⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05055625

DOI: 10.1080/00207543.2020.1828639

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