Open AccessEquilibrium strategies in a supply chain with capital constrained suppliers: The impact of external financing
Author(s) -
Qiang Yan,
Mingqiao Luan,
Yu Lin,
Fangyu Ye
Publication year - 2021
Publication title -
journal of industrial and management optimization
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.325
H-Index - 32
eISSN - 1553-166X
pISSN - 1547-5816
DOI - 10.3934/jimo.2020106
Subject(s) - business , trade credit , payment , revenue sharing , supply chain , production (economics) , competition (biology) , revenue , finance , equity (law) , industrial organization , microeconomics , monetary economics , economics , marketing , ecology , political science , law , biology
In this study, we consider a two-echelon supply chain, where two capital constrained suppliers compete to sell their products through a common retailer. The retailer may provide advance payment to one or two suppliers. We show that whether the retailer considers merging with only one supplier depends upon the revenue sharing ratio and the additional administrative costs of the revenue sharing contract. Meanwhile, the supplier who drops out of the market may adopt a hybrid financing scheme by combining bank credit with equity financing to return to the market. We find that the deselected supplier can be allowed to participate in the market when the bank loans ratio is below a certain threshold. We further investigate the impact of the bank loans ratio and competition intensity on the players' decisions and profits. In addition, we find that there exists an optimal bank loans ratio for the deselected supplier. Specifically, it is optimal for the deselected supplier to adopt pure bank credit if the production cost is sufficiently low.