Permissible delay period and pricing decisions in a two-echelon supply chain

ABSTRACT

Suppliers often offer trade credits to their capital-constrained retailers to stimulate more sales. The permissible delay period, as a variable factor, influences almost all decisions in a trade credit contract. In this article, we consider a two-echelon supply chain involving a supplier and a capital-constrained retailer in which the demand is the retail price- and time-dependent. We propose a decision model to determine the optimal delay period and pricing decisions under a noncooperative Stackelberg game with the supplier as the leader. We obtain the analytical-form optimal solutions. Our analysis reveals the influence of the delay period on the wholesale and retail prices. Numerical examples further clarify our theoretical results.

KEYWORDS:

• Trade credit
• capital constrained
• delay period
• wholesale and retail prices

JEL CLASSIFICATION:

• C51
• C61

Acknowledgments

This work was supported by the National Natural Science Foundation of China under Grant 71571065, the Program for New Century Excellent Talents in University under Grant NCET-13-0193, the Ministry of Education in China of Humanities and Social Science Project under Grant 14YJA630077 and the Guangzhou Financial Research Project under Grant GF1151B02.

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the National Natural Science Foundation of China under Grant 71571065, the Program for New Century Excellent Talents in University under Grant NCET-13-0193, the Ministry of Education in China of Humanities and Social Science Project under Grant 14YJA630077 and the Guangzhou Financial Research Project under Grant GF1151B02.