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The value of advance payment financing to carbon emission reduction and production in a supply chain with game theory analysis

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  • Juanjuan Qin
  • Yuqing Han
  • Guangming Wei
  • Liangjie Xia

Abstract

This paper investigates the value of advance payment financing to carbon emission reduction and production in a supply chain. We discuss two models, namely, (1) a supply chain model with a manufacturer that is not capital-constrained, under the conditions of being with and without advance payment financing, and (2) a supply chain model with a capital-constrained manufacturer, under the conditions of using bank financing and mixed financing. We characterize and compare the optimal solutions in the two supply chain models and then extend the models with cap-and-trade regulation and general stochastic demand. We find that in the supply chain model without a capital-constrained manufacturer, advance payment financing with a low-price discount can increase the supply chain partners’ profits. However, in the supply chain model with a capital-constrained manufacturer, when the manufacturer’s production cost is high, mixed financing with a low-price discount can improve both partners’ profits. Furthermore, in the model with a capital-constrained manufacturer, when the manufacturer’s carbon emission reduction efficiency is high, the use of mixed financing can encourage the manufacturer to increase carbon emission reductions. The results help the manufacturer and the retailer to decide whether to join in advance payment financing.

Suggested Citation

  • Juanjuan Qin & Yuqing Han & Guangming Wei & Liangjie Xia, 2020. "The value of advance payment financing to carbon emission reduction and production in a supply chain with game theory analysis," International Journal of Production Research, Taylor & Francis Journals, vol. 58(1), pages 200-219, January.
    • Handle: RePEc:taf:tprsxx:v:58:y:2020:i:1:p:200-219
    DOI: 10.1080/00207543.2019.1671626
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    Cited by:

    1. Li, Yanhai & Ou, Jinwen & Gu, Chaocheng, 2023. "Buyer guarantee and bailout in supplier finance with bankruptcy cost," European Journal of Operational Research, Elsevier, vol. 305(1), pages 287-299.
    2. Gu, Chaocheng & Wei, Juan & Wei, Ying, 2021. "Sourcing under competition: The implications of supplier capital constraint and supply chain co-opetition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 149(C).
    3. Zhang, Cheng & Xiao, Guangnian & Xu, Lang, 2024. "Manufacturers' emission-reduction investments in competing supply chains with Prisoner’s Dilemma: The economic and environmental impacts of Retailer(s) capital Constraint(s)," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 187(C).
    4. Qin, Juanjuan & Fu, Huiping & Wang, Ziping & Xia, Liangjie, 2021. "Financing and carbon emission reduction strategies of capital-constrained manufacturers in E-commerce supply chains," International Journal of Production Economics, Elsevier, vol. 241(C).
    5. Zheng, Yanyan & Zhao, Yingxue & Wang, Nengmin & Meng, Xiaoge & Yang, Honglin, 2022. "Financing decision for a remanufacturing supply chain with a capital constrained retailer: A study from the perspective of market uncertainty," International Journal of Production Economics, Elsevier, vol. 245(C).
    6. Tang, Ruihong & Yang, Lei, 2020. "Impacts of financing mechanism and power structure on supply chains under cap-and-trade regulation," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 139(C).
    7. Freida Ozavize Ayodele & Siti Indati Mustapa & Bamidele Victor Ayodele, 2023. "The Potential of Renewable Energy Green Financing through Carbon Taxation to Achieve Net-Zero Emissions Target," International Journal of Energy Economics and Policy, Econjournals, vol. 13(6), pages 388-396, November.
    8. Ma, Shigui & He, Yong & Gu, Ran & Li, Shanshan, 2021. "Sustainable supply chain management considering technology investments and government intervention," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 149(C).
    9. Abbas Sepehriar & Reza Eslamipoor, 2024. "An economical single-vendor single-buyer framework for carbon emission policies," Journal of Business Economics, Springer, vol. 94(6), pages 927-945, August.
    10. Shi, Jinzhao & Liu, Dian & Du, Qiang & Cheng, T.C.E., 2023. "The role of the procurement commitment contract in a low-carbon supply chain with a capital-constrained supplier," International Journal of Production Economics, Elsevier, vol. 255(C).
    11. Yongming Zhang & Weida Chen, 2022. "Optimal production and financing portfolio strategies for a third‐party remanufacturing supply chain with capital constraint," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(7), pages 3072-3094, October.
    12. Daehyeon Park & Doojin Ryu, 2023. "E‐commerce retail and reverse factoring: A newsvendor approach," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 416-423, January.
    13. Changhong Li & Jiani Gao & Jiaqi Guo & Jialuo Wang, 2022. "Low-Carbon Supply Chain Decisions Considering Carbon Emissions Right Pledge Financing in Different Power Structures," Energies, MDPI, vol. 15(15), pages 1-22, August.

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