Trade and bank credit in a non-cooperative chain with a price-sensitive demand. Issue 5 (4th March 2022)

• Record Type: Journal Article
• Authors: Hovelaque, Vincent; Viviani, Jean-Laurent; Ait Mansour, Mohamed
• Is Part Of: International journal of production research. Volume 60:Issue 5(2022)
• Page Start: 1553
• Page End: 1568
• Publication Date: 2022-03-04
• Subjects: Trade credit -- bank credit -- supply chain finance -- inventory -- game theory; Factory management -- Periodicals; 658.57
• DOI: 10.1080/00207543.2020.1866222
• Languages: English
• ISSNs: 0020-7543

Abstract

ABSTRACT: The purpose of this article is to examine the impact of the working capital in the borrowing decision of a retailer. The proposed analysis is based on a model with a retailer, a supplier and a bank in a non-cooperative game with price-sensitive demand. The retailer, the supplier and the bank (if concerned) determine, respectively, the ordering quantity, the wholesale price and the interest rate. A Stackelberg game-theoretic approach is employed where the retailer is a follower and either the supplier or the bank is the leader. Some structural properties are first derived from the mathematical models. Then, some numerical simulations show that: (i) a trade credit guarantees the same profits for the retailer and the supplier as in the case where the retailer has sufficient cash holdings, (ii) there exist some situations where the retailer has a better profit with a borrow than with sufficient cash holdings, and (iii) borrowing decision depends on both retailer's and supplier's discount rate and the retailer's cash holdings.