On The Trade Credit Policy With Capital Constraints And Supplier’s Risk Appetites

Delay in payments as an important promotional tool has been widely existed in commercialactivities. By providing deferred payment policy for retailers, suppliers can increase sales, andexpand the market share. Retailers can use the sales income within the delay in payments to gaininvestment income, which can relieve enterprise financial pressure. A reasonable delay inpayments policy can not only increase profits of suppliers and retailers, but also relieve financialpressure of suppliers and the retailers.Awin-win outcome can be realized.Based on the related researches, for the deferred payment inventory model, this papermakes a further discussion and research. By taking the price discount、financial constraints andrisk appetites into consideration, we establish a more realistic Stackelberg game model. Based onthe model, we study the setting issue of the trade credit policy from the suppliers’ perspective.The main contents and conclusions of this paper are as follows.(1) Under the situation that the supplier provides a delay in payment policy and a pricediscount policy for the retailer, this paper establishes a supplier-Stackelberg game model for theproblem of determining the trade credit policy. Based on computing the model, we present thesupplier’s optimal conditional trade credit policy, the retailer’s optimal order quality and optimalpayment time as well.(2) Under the condition of deferred payment, in order to reduce the supplier’s bad debts orrepudiation risk, we introduce the price discount strategy to encourage retailer to make a partialpayment when ordering. Base on the price discount and delay in payment strategy, this paperestablishes a Stackelberg game model for the case of supplier with different risk references. Atlast, we not only present the supplier’s optimal delay in payment policy for different purposes(less risk or maximum profit), but also present the retailer’s optimal replenishment quantity andordering method.(3) For the case that the retailer has capital constraint, we introduce the price discountstrategy, set a reasonable deferred payment policy and study the setting issue of the conditionaland partial trade credit policy from the supplier’s perspective. This policy can not only stimulatethe retailer to make a larger order at each replenishment cycle and increase the two parts’ profits,but also encourage the retailer with relatively abundant capital to make a partial payment for theorder, which sharing the risk capital of the supplier. Thus, a win-win outcome can be realized.