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Selection of financing strategies with a risk-averse supplier in a capital-constrained supply chain

Bo Li, Si-min An and Dong-ping Song

Transportation Research Part E: Logistics and Transportation Review, 2018, vol. 118, issue C, 163-183

Abstract: This paper investigates a supply chain where the retailer is capital-constrained and the supplier is risk-averse. The supplier's risk-averse behavior is gauged by Conditional Value-at-Risk method under two financing strategies: partial credit guarantee(PCG) and trade credit financing(TCF). We obtain the equilibrium solutions and characterize the preference of two financing strategies by the switching curves in two-dimensional space of credit guarantee coefficient and risk aversion degree. We find that there exists a region where TCF outperforms PCG for both players. Finally, we extend the model to the case in which both players are risk-averse and obtain similar results.

Keywords: Supply chain management; Financing strategy; Trade credit; Risk aversion; Game theory (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1016/j.tre.2018.06.007

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