Study on the Selection Strategy of Supply Chain Financing Modes Based on the Retailer’s Trade Grade

Jianjun Yu and Dan Zhu
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Jianjun Yu: School of Business Administration, South China University of Technology, Guangzhou 510640, China
Dan Zhu: School of Business Administration, South China University of Technology, Guangzhou 510640, China

Sustainability, 2018, vol. 10, issue 9, 1-12

Abstract: In the supply chain financing (SCF) system composed of a capital-constrained retailer, a supplier and a commercial bank, we design two different limited financing modes (internal financing and external financing) based on the retailer’s collateral assets. A newsvendor-like retailer has a single opportunity to order goods from a supplier to satisfy future uncertain demand. In the presence of bankruptcy risk for the retailer, we model their strategic interaction as a Stackelberg game with the supplier as the leader and analyze the optimal decisions for each participant. Regardless of which financing mode is chosen, the capital-constrained retailer orders fewer goods if the financing cost is relatively high. In addition, when the market demand obeys the uniform distribution, if the retailer possesses more collateral assets, he will enjoy a lower loan interest rate and increase order quantity gradually. Moreover, compared with the internal financing mode, each participant obtains the larger expected profits under the external financing mode.

Keywords: trade grade; internal financing; external financing; bankruptcy threshold; Stackelberg game (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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