Group for Research in Decision Analysis

Buyer direct financing under supplier disruption risk

Xiao Huang John Molson School of Business, Concordia University, Canada

Xiao Huang

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We consider a dyadic supply chain in which a large and creditworthy buyer procures from a capital-constrained supplier subject to disruption risk. The buyer may offer direct financing (BDF) to the supplier with customized payment terms (PE) and tailored interest rates (TR). We analyze the value and interplay of these elements by characterizing equilibrium contractual terms under several BDF contracts with different PE and TR potentials.