Supply chain networks with corporate financial risks and trade credits under economic uncertainty

The focus of this paper is to provide an analytical framework which can be used to investigate how financial risks affect the values of interconnected supply chain firms from a network perspective, and how financial risks affect the supply chain firms' profitability as well as the cash and credit transactions. In particular, we develop a variational inequality equilibrium model in conjunction with capital asset pricing model (CAPM) and the net present value (NPV) to determine the optimal supply chain prices, profits, and implicit equity values of supply chain firms under financial risks and economic uncertainty. We illustrate the analytical framework with computational studies which yield interesting managerial implications to the following questions: (1) How do financial risks and economic uncertainty affect the values of interconnected supply chain firms from a network perspective? (2) How do financial risks and economic uncertainty affect the supply chain firms' profitability as well a; the cash and credit transactions? (3) How does the effect of financial risks change under different competition scenarios? (C) 2012 Elsevier B.V. All rights reserved.