Trade and bank credit in a non-cooperative chain with a price-sensitive demand

Vincent Hovelaque, Jean-Laurent Viviani () and Mohamed Ait Mansour
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Jean-Laurent Viviani: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique
Mohamed Ait Mansour: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique

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Abstract: The purpose of this article is to examine the impact of the working capital in the borrowing decision of a retailer. The proposed analysis is based on a model with a retailer, a supplier and a bank in a non-cooperative game with price-sensitive demand. The retailer, the supplier and the bank (if concerned) determine, respectively, the ordering quantity, the wholesale price and the interest rate. A Stackelberg game-theoretic approach is employed where the retailer is a follower and either the supplier or the bank is the leader. Some structural properties are first derived from the mathematical models. Then, some numerical simulations show that: (i) a trade credit guarantees the same profits for the retailer and the supplier as in the case where the retailer has sufficient cash holdings, (ii) there exist some situations where the retailer has a better profit with a borrow than with sufficient cash holdings, and (iii) borrowing decision depends on both retailer's and supplier's discount rate and the retailer's cash holdings.

Keywords: Trade credit; bank credit; Bank credit; Game theory; Supply chain finance; Inventory (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-gth
Note: View the original document on HAL open archive server: https://hal.science/hal-03127787v1
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Citations: View citations in EconPapers (5)

Published in International Journal of Production Research, 2022, 60 (5), pp.1553-1568. ⟨10.1080/00207543.2020.1866222⟩

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Journal Article: Trade and bank credit in a non-cooperative chain with a price-sensitive demand (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03127787

DOI: 10.1080/00207543.2020.1866222

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