Journal article

Equilibrium evolution in a two-echelon supply chain with financially constrained retailers: The impact of equity financing

H Yang, W Zhuo, L Shao

International Journal of Production Economics | Elsevier | Published : 2017

Abstract

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 ot..

View full abstract

University of Melbourne Researchers

Grants

Awarded by National Natural Science Foundation of China


Awarded by Program for New Century Excellent Talents in University


Awarded by Ministry of Education in China of Humanities and Social Science


Funding Acknowledgements

The research is supported by the National Natural Science Foundation of China under Grant nos. 71571065 and 71521061, the Program for New Century Excellent Talents in University under Grant no. NCET-13-0193, the Ministry of Education in China of Humanities and Social Science Project under Grant no. 14YJA630077, and a seed grant from the Melbourne Business School's Center for Business Analytics. The authors thank Mr. Qiang Long, CEO of Turner Company, for providing the market analysis report. The authors also gratefully acknowledge Asian-Pacific Editor Professor Edwin Cheng and the anonymous referees for their helpful and valuable comments and advice.