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Financing the capital-constrained online retailer with risk aversion: coordinating strategy analysis

Author

Listed:
  • Yi Tao

    (Guangdong University of Technology)

  • Ruisi Yang

    (Guangdong University of Technology)

  • Xiaopo Zhuo

    (Sun Yat-Sen University)

  • Fan Wang

    (Sun Yat-Sen University)

  • Xiao Yang

    (Sun Yat-Sen University)

Abstract

This paper considers a capital-constrained online retailer (OR) selling products through an e-commerce platform (EP) who also offers financial services to retailers. During the selling season, the OR exerts an effort to promote market demand through activities like sales promotions, advertising and live-streaming selling events. To investigate the EP-based financing scheme, a game-theoretic model is developed where the EP functions as the leader determining the interest rate and platform usage fee rate, and the OR functions as the follower determining the order quantity and effort level. We explore the impacts of the OR’s risk-aversion and find that when the OR is risk-averse (1) she sets a high effort level, and the EP sets a high usage fee rate; (2) a high risk-averse OR orders less products than low risk-averse OR. We design specific revenue-cost sharing contracts to coordinate the supply chain and demonstrate that the designed contracts are feasible. Moreover, we find that the OR consistently prefers EP financing compared to bank financing.

Suggested Citation

  • Yi Tao & Ruisi Yang & Xiaopo Zhuo & Fan Wang & Xiao Yang, 2023. "Financing the capital-constrained online retailer with risk aversion: coordinating strategy analysis," Annals of Operations Research, Springer, vol. 331(1), pages 321-349, December.
    • Handle: RePEc:spr:annopr:v:331:y:2023:i:1:d:10.1007_s10479-022-04632-4
    DOI: 10.1007/s10479-022-04632-4
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