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Production and Financing Strategies of a Distribution Channel under Random Yield and Random Demand

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  • Li Shen
  • Liying Li
  • Xiaobing Li

Abstract

This study considers a distribution channel consisting of a manufacturer with capital constraint and uncertain yield and a retailer that faces random demand. To maintain production, the manufacturer can either (1) avail bank credit financing from a perfectly competitive market or (2) request advance payment from the retailer. First, we establish two Stackelberg game models under bank credit financing (BCF) and advance payment mechanism (APM). By comparing the equilibrium strategies of the two financing models and the optimal profits of channel members, we conclude that APM is more advantageous than BCF in terms of improving channel performance. Second, we design a revenue sharing (RS) contract based on APM to achieve channel coordination. Finally, numerical analysis is presented to verify the conclusions obtained in this study.

Suggested Citation

  • Li Shen & Liying Li & Xiaobing Li, 2021. "Production and Financing Strategies of a Distribution Channel under Random Yield and Random Demand," Mathematical Problems in Engineering, Hindawi, vol. 2021, pages 1-14, February.
    • Handle: RePEc:hin:jnlmpe:8836632
    DOI: 10.1155/2021/8836632
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