Purchase order financing: credit, commitment, and supply chain consequences

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buir.contributor.authorTanrısever, Fehmi
dc.citation.epage1303en_US
dc.citation.issueNumber5en_US
dc.citation.spage1287en_US
dc.citation.volumeNumber66en_US
dc.contributor.authorReindorp, M.en_US
dc.contributor.authorTanrısever, Fehmien_US
dc.contributor.authorLange, A.en_US
dc.date.accessioned2019-02-24T14:16:02Zen_US
dc.date.available2019-02-24T14:16:02Zen_US
dc.date.issued2018en_US
dc.departmentDepartment of Managementen_US
dc.description.abstractWe study a supply chain where a retailer buys from a supplier who faces financial constraints. Informational problems about the supplier’s demand prospects and production capabilities restrict her access to capital. By committing to a minimum purchase quantity, the retailer can mitigate these informational problems and expand the supplier’s feasible production set. We assume a newsvendor model of operations and analyze the strategic interaction of the two parties as a sequential game. Key parameters in our model are the supplier’s ex ante credit limit, her informational transparency—which conditions the amount of additional capital released by the commitment—and the demand characteristics of the final market. We show that in equilibrium the supplier can benefit from a lower ex ante credit limit or lower informational transparency. The retailer always benefits from an increase in these parameters. We also indicate limits to the commitment approach: under certain conditions, the retailer may prefer to relax the supplier’s financial constraint by adjusting the wholesale price, or a combination of wholesale price and commitment. Our study provides a novel perspective on capital market frictions in supply chains.en_US
dc.identifier.doi10.1287/opre.2018.1727en_US
dc.identifier.eissn1526-5463
dc.identifier.issn0030-364X
dc.identifier.urihttp://hdl.handle.net/11693/50589
dc.language.isoEnglishen_US
dc.publisherINFORMSen_US
dc.relation.isversionofhttps://doi.org/10.1287/opre.2018.1727en_US
dc.source.titleOperations Researchen_US
dc.subjectPurchase order financingen_US
dc.subjectCapital constraintsen_US
dc.subjectInformational transparencyen_US
dc.subjectImperfect financial marketsen_US
dc.titlePurchase order financing: credit, commitment, and supply chain consequencesen_US
dc.typeArticleen_US
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