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Trade credit insurance: insuring strategy of the retailer and the manufacturer

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  • Hongping Li
  • Gongbing Bi
  • Wen Song
  • Xiaoyong Yuan

Abstract

This study analyses the role of trade credit insurance and the insuring strategy of the retailer and the manufacturer in a capital-constrained supply chain with one retailer, one manufacturer, and one insurer. We model the interaction among these three participants as a two-level Stackelberg game and explore their operational and financial decisions. We find that trade credit insurance is adopted when the manufacturer's loss aversion is high or the retailer's initial capital is low. The adoption of trade credit insurance improves the order quantity of the retailer, the performance of each supply chain participant, and supply chain efficiency. However, it also increases the bankruptcy risk of the retailer and the instability of the entire supply chain. In addition, the application of trade credit insurance by the manufacturer alone is more beneficial to the manufacturer, insurer, and entire supply chain as it creates better performance for them. Conversely, the purchase of trade credit insurance by the retailer is more desirable to the retailer as it yields not only a higher profit but also a lower bankruptcy risk.

Suggested Citation

  • Hongping Li & Gongbing Bi & Wen Song & Xiaoyong Yuan, 2022. "Trade credit insurance: insuring strategy of the retailer and the manufacturer," International Journal of Production Research, Taylor & Francis Journals, vol. 60(5), pages 1478-1499, March.
    • Handle: RePEc:taf:tprsxx:v:60:y:2022:i:5:p:1478-1499
    DOI: 10.1080/00207543.2020.1861358
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    Cited by:

    1. Wang, Chengfu & Chen, Xiangfeng & Xu, Xun & Jin, Wei, 2023. "Financing and operating strategies for blockchain technology-driven accounts receivable chains," European Journal of Operational Research, Elsevier, vol. 304(3), pages 1279-1295.
    2. Riccardo Camilli & Alessandro Mechelli & Alessandra Stefanoni & Fabrizio Rossi, 2023. "Addressing Managerial Loss Aversion for the Corporate Value Creation Process: A Critical Analysis of the Literature and Preliminary Approaches," Administrative Sciences, MDPI, vol. 14(1), pages 1-16, December.
    3. Jing Qin & Kun Qin & Yuxiang Cheng & Desheng Wu, 2022. "Trade Credit Insurance for the Capital-Constrained Supplier," Sustainability, MDPI, vol. 14(21), pages 1-19, October.

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