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The Incentive Model in Supply Chain with Trade Credit and Default Risk
Joint Authors
Wang, Xianyu
Cheng, Hong
Yan, Jinjiang
Li, Mingyang
Su, Yingsheng
Source
Issue
Vol. 2019, Issue 2019 (31 Dec. 2019), pp.1-11, 11 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2019-05-02
Country of Publication
Egypt
No. of Pages
11
Main Subjects
Abstract EN
Trade credit is widely used for its advantages.
However, trade credit also brings default risk to the manufacturer due to the uncertain demand.
And moral hazard may aggravate the default risk.
The purpose of this paper is to investigate the role of moral hazard in trade credit and explore incentive contract under uncertain demand and asymmetric information.
We consider a two-echelon supply chain consisting of a risk-neutral retailer ordering a single product from a risk-neutral manufacturer.
Market demand is stochastic and is influenced by retailer’s sales effort which is his private information.
Incentive theory is used to develop the principal-agent model and get the incentive contract from the manufacturer’s perspective.
Results show that the retailer will reduce his effort level to get more profit and the manufacturer’s profit will be reduced, in the case of asymmetric information.
Facing this result, the manufacturer will reduce the order quantity in incentive contract to lessen his losses.
Numerical examples are provided to illustrate all these theoretical results and to draw managerial insights.
American Psychological Association (APA)
Cheng, Hong& Su, Yingsheng& Yan, Jinjiang& Wang, Xianyu& Li, Mingyang. 2019. The Incentive Model in Supply Chain with Trade Credit and Default Risk. Complexity،Vol. 2019, no. 2019, pp.1-11.
https://search.emarefa.net/detail/BIM-1132262
Modern Language Association (MLA)
Cheng, Hong…[et al.]. The Incentive Model in Supply Chain with Trade Credit and Default Risk. Complexity No. 2019 (2019), pp.1-11.
https://search.emarefa.net/detail/BIM-1132262
American Medical Association (AMA)
Cheng, Hong& Su, Yingsheng& Yan, Jinjiang& Wang, Xianyu& Li, Mingyang. The Incentive Model in Supply Chain with Trade Credit and Default Risk. Complexity. 2019. Vol. 2019, no. 2019, pp.1-11.
https://search.emarefa.net/detail/BIM-1132262
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1132262