Price Timing and Financing Strategies for a Capital-Constrained Supply Chain with Price-Dependent Stochastic Demand

We investigate the pricing timing strategy in the context of trade credit (TC), under which the capital-constrained retailer applies for deferred payments from its supplier. Based on the wholesale price offered by the supplier, the retailer determines the order volume before observing the random demand and the selling price after observing it (a.k.a., price postponement). We formulate the Stackelberg game to show how their equilibrium decisions and profits are affected by: the pricing timing, financing mode, the demand structure. The analytical and numerical results indicate that TC alleviates double marginalization problem, depending on price timing and demand structure. With the traditional bank finance (BF) as a benchmark, the supplier is reluctant to provide TC to the retailer without postponement when the market is extremely sensitive to price. Postponement enhances participants' preference for TC, due to it enhances retailer's bargaining power and repayment ability. It benefits both members under BF and TC