Journal
INTERNATIONAL JOURNAL OF PRODUCTION ECONOMICS
Volume 185, Issue -, Pages 139-149Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.ijpe.2016.12.027
Keywords
Trade credit; Equity financing; Cournot competition; Capital constraints
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Funding
- National Natural Science Foundation of China [71571065, 71521061]
- Program for New Century Excellent Talents in University [NCET-13-0193]
- Ministry of Education in China of Humanities and Social Science [14YJA630077]
- Melbourne Business School's Center for Business Analytics
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This paper considers a two-echelon supply chain that has a supplier and two capital constrained retailers and in which the retailers compete in a Cournot fashion. We study the impact of external financing on the players' optimal decisions and supply chain performance. We show that as competition intensity increases, the supplier (as the Stackelberg leader) may consider merging with one retailer to avoid double marginalization. Yet, the deselected retailer may utilize external financing to return to the supply chain. We explicitly model the evolution of equilibrium scenarios and identify the conditions under which the supplier may prefer to provide trade credit to only one retailer and the other retailer may use external financing. We also carry out extensive sensitivity analyses with respect to a retailer's capital structure and the retailer's competition intensity.
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