Trade credit contract with limited liability in the supply chain with budget constraints

The paper investigates the impacts of trade credit (i.e., open account payment) and limited liability on the performance of a two-level supply chain with budget constraints. It shows that limited liability accounts for the reason why the retailer with a lower initial budget initiates a higher ordering level under trade credit contract. Furthermore, this paper finds that trade credit contract could create value in a supply chain with budget constraints, and partly coordinate the supply chain.

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