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Trade Credit Pricing with Retailer’s Capital Heterogeneity

In: City, Society, and Digital Transformation

Author

Listed:
  • Mingyu Zheng

    (Southern University of Science and Technology)

  • Yonghui Chen

    (Southern University of Science and Technology)

  • Qiao-Chu He

    (Southern University of Science and Technology)

Abstract

This paper studies a supplier’s optimal trade credit provision and pricing decisions when there is capital heterogeneity among its retailers. To this end, we start with a baseline model where there is a capital-constrained retailer requiring trade credit financing from the supplier. We identify a capital threshold at which providing trade credit or not is indifferent to the supplier. The identification allows us to extend our analysis to a supply chain including various retailers. We find that the supplier should provide trade credit to retailers whose capital level is lower than the threshold. Those retailers who need trade credit but have relatively high capital will be excluded. Thus, our results provide managerial insights for the supplier to decide which retailers should be provided with trade credit.

Suggested Citation

  • Mingyu Zheng & Yonghui Chen & Qiao-Chu He, 2022. "Trade Credit Pricing with Retailer’s Capital Heterogeneity," Lecture Notes in Operations Research, in: Robin Qiu & Wai Kin Victor Chan & Weiwei Chen & Youakim Badr & Canrong Zhang (ed.), City, Society, and Digital Transformation, chapter 0, pages 73-79, Springer.
    • Handle: RePEc:spr:lnopch:978-3-031-15644-1_7
    DOI: 10.1007/978-3-031-15644-1_7
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