Optimal Stackelberg strategies for financing a supply chain through online peer-to-peer lending

• Main Authors: GAO, Guang-Xin, FAN, Zhi-Ping, FANG, Xin, LIM, Yun Fong
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2018
• Subjects: Supply chain management; Supply chain finance; Online P2P lending; Stackelberg game; Operational and financial decisions; Finance; Operations and Supply Chain Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/5789; https://ink.library.smu.edu.sg/context/lkcsb_research/article/6788/viewcontent/yflim_EJOR2018.pdf
• Institution: Singapore Management University

In recent years, supply chain finance (SCF) through online peer-to-peer (P2P) lending platforms has gained its popularity. We study an SCF system with a manufacturer selling a product to a retailer that faces uncertain demand over a single period. We assume that either the retailer or the manufacturer faces a capital constraint and must borrow capital through an online P2P lending platform. The platform determines a service rate for the loan, the manufacturer sets a wholesale price for the product, and the retailer chooses its order quantity for the product. We identify optimal Stackelberg strategies of the participants in the SCF system. For an SCF system with a capital-constrained retailer, we find that the retailer's optimal order quantity and the manufacturer's optimal wholesale price decrease with the platform's service rate. For an SCF system with a capital-constrained manufacturer, we find that as the platform's service rate increases, the manufacturer's optimal wholesale price increases but the retailer's optimal order quantity decreases. Our analysis suggests that it is important for the retailer and the manufacturer to take the online P2P lending platform's financial decisions (such as the service rate) into account when making their operational decisions.