Trade credit: A new mechanism to coordinate supply chain

Abstract This paper studies the benefit of coordinating supply chain with trade credit under both symmetric and asymmetric information. We derive the optimal credit periods under both symmetric and asymmetric information (with regard to the buyer’s capital cost) from the vendor’s perspective. Our results show that using trade credit can coordinate the supply chain in the case of symmetric information. While in the case of asymmetric information, the buyer benefits from trade credit; but unfortunately, the supply chain does not coordinate.

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