THE EFFECT OF FINANCING ON A BUDGET-CONSTRAINED SUPPLY CHAIN UNDER WHOLESALE PRICE CONTRACT

This paper examines the impact of financing on the performance of a two-level supply chain consisting of a supplier and a budget-constrained retailer. To carry out our study, we set up a three-stage Stackelberg game under a wholesale price contract with a financial market. We show that financing from a competitive financial market can create value for both the supplier and the retailer. We also demonstrate that in a competitive financial market with symmetric information on the retailer's initial budget, the retailer's operational and financial decisions could be decoupled. We provide numerical results to shed light on additional managerial insights as well.