Guarantor Financing Selection Under Influence of Supply Chain Leadership and Economies of Scale

Tiantian Lin, Weihua Zhou and Cai, Gangshu (George)

Foundations and Trends(R) in Technology, Information and Operations Management, 2020, vol. 14, issue 1-2, 23-43

Abstract: This paper investigates manufacturer guarantor financing (MG) and third-party logistics (3PL) guarantor financing (LG) in a four-party supply chain game that features a manufacturer, a 3PL, a capital-constrained retailer, and a bank. The manufacturer or 3PL can act as the guarantor for the retailer who borrows bank credit. Two different leadership structures are investigated, namely, Nash game and manufacturer leadership Stackelberg game, where the manufacturer and 3PL make their decisions simultaneously and sequentially, respectively. Our analysis shows that the supply chain under both leadership structures prefers guarantor financing to traditional bank financing when the supply chain is cost-efficient. Nevertheless, both upstream firms prefer the other to be the guarantor in the Nash game, whereas under the manufacturer Stackelberg leadership, the 3PL may prefer itself to be the guarantor. Furthermore, the supply chain under guarantor financing with a longer decision hierarchy (i.e., the Stackelberg game) can be conditionally more efficient than that with a shorter one (i.e., the Nash game). These findings enhance our understanding of the value of guarantor financing in a capital-constrained supply chain and the impact of leadership structure on financing decisions.

Keywords: Supply; chain; management (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:now:fnttom:0200000096-2

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