A Partial Credit Guarantee Contract in a Capital-Constrained Supply Chain: Financing Equilibrium and Coordinating Strategy

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Journal Article

Authors:
Yan, Nina
Sun, Baowen
Chongqing, Lui
Hui Zhang
Publication year:
2016

In this study, we first design a supply chain finance (SCF) system comprising a capital-constrained retailer, a manufacturer, and a commercial bank, and formulate a bi level Stackelberg game model in which the bank acts as a leader. Second, we design a partial credit guarantee (PCG) contract for SCF, incorporating the bank credit financing (BCF) and manufacturer’s trade credit guarantee, to analyze its equilibrium financing strategies. Third, we explore the inter dependencies between the operational and financial decisions and analyze the coordination conditions for the PCG contract. Fourth, we perform a comparative analysis of the optimal strategies among the various financing scenarios, including a traditional supply chain without capital constraint and SCF without credit guarantee as well as one with full credit guarantee, to examine the impact of the credit guarantee coefficient. Finally, we perform a numerical sensitivity analysis in terms of the manufacturer’s guarantee coefficient and the retailer’s initial capital, and verify the manufacturer’s willingness to provide PCG for SCF. The findings of this study reveal that based on a suitable guarantee coefficient, the PCG contract may realize profit maximization and channel coordination in the SCF system as well as achieve the super-coordination effect.

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