Financing online retailers: Bank vs. electronic business platform, equilibrium, and coordinating strategy

Chengfu Wang, Xiaojun Fan and Zhe Yin

European Journal of Operational Research, 2019, vol. 276, issue 1, 343-356

Abstract: We consider a new financing source for online retailers, namely an electronic business (EB) platform, which is divided into an active and a conservative form according to the level of integration of lending and leasing businesses. The newsvendor-like online retailer is capital-constrained and can choose between EB platform financing and bank credit financing (BCF). We model their interaction as a Stackelberg game, where the online retailer functions as the follower who decides the order quantity and the lender (bank or EB platform) functions as the leader who declares the loan interest rate or the EB platform’s usage fee rate. From the equilibrium and coordinating analyses, we conclude that the active EB platform financing can achieve supply chain financing (SCF) coordination, yielding a larger order quantity and larger participants’ profits than those yielded through BCF, while the conservative may not. When the coordination condition on order quantity is satisfied, if the initial working capital is a constant, there exists a linear decreasing trend between the EB platform’s loan interest rate and the usage fee rate. When the weak coordination conditions are satisfied, the active EB platform can offer many coordinated financing contracts, which are applicable to different initial working capital conditions. For achieving SCF coordination, the EB platform should be active to adjust his loan interest rate and usage fee rate together. Moreover, even if the online retailer has sufficient working capital, she always prefers using the coordinated active EB platform financing to refusing any outside financing.

Keywords: Finance; Online retailer; Trade credit; Stackelberg game; Supply chain coordination (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (58)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0377221719300116
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:276:y:2019:i:1:p:343-356

DOI: 10.1016/j.ejor.2019.01.009

Access Statistics for this article

European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati

More articles in European Journal of Operational Research from Elsevier
Bibliographic data for series maintained by Catherine Liu ().