Trade credit policy of supply chain with oversupply

Abstract

Trade credit arises when a buyer delays payment for purchased goods or services. In order to explore the trade credit policy when the supplier is produce surplus under deterministic linear demand, based on the wholesale price contract, we establish a two-echelon financial supply chain game model with a supplier and a retailer under the condition of excess supplying, and obtain the decisions and the profits of supply chain which credit trade is considered. Both the participants' decision objective is return maximization, then we obtain the equilibrium solution. We find, based on the wholesale price contract, the supplier suffers from oversupply but the retailer benefits from oversupply, and supply chain efficiency is impaired by oversupply. Trade credit for retailers cannot improve both supply chain sales quantity and mutual benefits. Additionally, trade credit is a useful tool available for supplier to stabilize the wholesale price on overcapacity.