Research on Trade Credit and Bank Credit Based on Dynamic Inventory

Quansheng Lei, Zhelian Xu and Siqi Yang
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Quansheng Lei: School of Automation, Beijing University of Posts and Telecommunications, Beijing 100876, China
Zhelian Xu: School of Automation, Beijing University of Posts and Telecommunications, Beijing 100876, China
Siqi Yang: School of Management and Economics, Beijing Institute of Technology, Beijing 102488, China

Sustainability, 2019, vol. 11, issue 13, 1-29

Abstract: Trade credit is a short-term business financing based on purchases between the retailer and the supplier. This paper considers a supply chain consisting of a well-funded supplier and a capital-constrained retailer. At the beginning of each sales season, the retailer need to place an order from the supplier to meet the stochastic demand. The capital-constrained retailer determines the order quantity and whether to borrow loans from a bank or the supplier or just use its initial capital, according to its finance and stock status with the wholesale price provided by the supplier. We build the Stackelberg game with the supplier as the leader and divide the retailer’s initial inventory and capital into different wealth regions to discuss the optimal strategies of different wealth regions. We extend to the two-period dynamic financing model based on dynamic inventory and capital flow so as to obtain the optimal strategy matrix of the retailer and the supplier under bank and trade credit. Numerical results validate our theoretical analysis of bank credit and supplier credit with dynamic inventory under different period setting.

Keywords: multiple period; trade credit; dynamic inventory (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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