Supply chain financing mechanism with guarantee insurance

Abstract

This paper designs a bankruptcy guarantee insurance contract for a capital constrained retailer who can choose two financing ways of trade credit and bank credit. Different from the existing research, we introduced a third party insurance institution to undertake the loss of the retailer in bankruptcy. Under the two financing mechanisms, we present the optimal decision for each subject and analyze the influence of each parameter on the decision making and the revenues. The results facilitate scientific policy development and provide a reference for promoting finance sourcing operations in a supply chain.