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Selection of financing strategies with a risk-averse supplier in a capital-constrained supply chain

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  • Li, Bo
  • An, Si-min
  • Song, Dong-ping

Abstract

This paper investigates a supply chain where the retailer is capital-constrained and the supplier is risk-averse. The supplier's risk-averse behavior is gauged by Conditional Value-at-Risk method under two financing strategies: partial credit guarantee(PCG) and trade credit financing(TCF). We obtain the equilibrium solutions and characterize the preference of two financing strategies by the switching curves in two-dimensional space of credit guarantee coefficient and risk aversion degree. We find that there exists a region where TCF outperforms PCG for both players. Finally, we extend the model to the case in which both players are risk-averse and obtain similar results.

Suggested Citation

  • Li, Bo & An, Si-min & Song, Dong-ping, 2018. "Selection of financing strategies with a risk-averse supplier in a capital-constrained supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 118(C), pages 163-183.
    • Handle: RePEc:eee:transe:v:118:y:2018:i:c:p:163-183
    DOI: 10.1016/j.tre.2018.06.007
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