Selection of financing strategies with a risk-averse supplier in a capital-constrained supply chain

By Bo Li, Simin An, D. Song. Transportation Research Part E: Logistics and Transportation Review, 2018

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This paper investigates a supply chain where the retailer is capital-constrained and the supplier is risk-averse. The supplier's risk-averse behavior is gauged by Conditional Value-at-Risk method under two financing strategies: partial credit guarantee(PCG) and trade credit financing(TCF). We obtain the equilibrium solutions and characterize the preference of two financing strategies by the switching curves in two-dimensional space of credit guarantee coefficient and risk aversion degree. We find that there exists a region where TCF outperforms PCG for both players. Finally, we extend the model to the case in which both players are risk-averse and obtain similar results.

Subfields: Accounting, Management Information Systems, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/dbc8293433c72d29e2223ef77886f1734b4a4daf