Financing and ordering decisions in a capital-constrained and risk-averse supply chain for the monopolist and non-monopolist supplier

Abstract

<p style='text-indent:20px;'>The paper focuses on a supply chain consisting of one supplier and one capital-constrained retailer. The retailer can solve the limited working capital problem through a bank, an investor, or its supplier. When facing business risks brought by uncertain demand, the retailer and the supplier are risk-averse behavior. To better explore the financing decision, we consider the supplier has two different cases: monopolist firm and non-monopolist firm. We first use the CVaR criterion to incorporate the members' risk-averse behavior into the objectives function. Then the equilibrium results of the supply chain are derived under three financing schemes, respectively. Our analysis finds when the supplier is a relatively low risk-averse monopolist firm, trade credit financing is the unique financing equilibrium. When the supplier is a relatively high risk-averse monopolist firm and non-monopolist firm, schemes, if the valuation level is relatively low, all members prefer bank credit financing. Otherwise, the members prefer equity financing. By tuning the valuation level, we obtain the conditions in which the supply chain realizes Pareto improvement relative to the other two financing schemes. Finally, we use numerical analysis to verify the above theoretical results.</p>