On the conditional and partial trade credit policy with capital constraints: A Stackelberg model

For the two-echelon supply chain with stable market demand, by taking the supplier's capital constraint into consideration, we establish a conditional and partial trade credit model, which actually is a Stackelberg model with the supplier being a leader in the game. By analyzing two parties' optimal decisions in the game, we provide the supplier with a threshold for setting the model. The model can not only stimulate the retailer to make a larger order at each replenishment cycle, but also incite the retailer to make a partial payment when he is in a good financial condition. Hence, the supplier's financial pressure is marginally relieved in this model. On the other hand, the retailer's benefit in the traditional trade credit model does not decrease. Thus, the new model makes the supply chain more stable and a win-win outcome can be realized. We illustrate the validity of the model via a set of numerical experiments. The sensitivity and the Pareto optimality of the model are also discussed in this paper. (C) 2015 Elsevier Inc. All rights reserved.