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Trade credit contract with limited liability in the supply chain with budget constraints

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  • Xiangfeng Chen
  • Anyu Wang

Abstract

The paper investigates the impacts of trade credit (i.e., open account payment) and limited liability on the performance of a two-level supply chain with budget constraints. It shows that limited liability accounts for the reason why the retailer with a lower initial budget initiates a higher ordering level under trade credit contract. Furthermore, this paper finds that trade credit contract could create value in a supply chain with budget constraints, and partly coordinate the supply chain. Copyright Springer Science+Business Media, LLC 2012

Suggested Citation

  • Xiangfeng Chen & Anyu Wang, 2012. "Trade credit contract with limited liability in the supply chain with budget constraints," Annals of Operations Research, Springer, vol. 196(1), pages 153-165, July.
    • Handle: RePEc:spr:annopr:v:196:y:2012:i:1:p:153-165:10.1007/s10479-012-1119-0
    DOI: 10.1007/s10479-012-1119-0
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