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A two‐echelon supply chain with a capital‐constrained retailer is investigated where uncertain demand and defective products are considered. As an intermediate between the retailer and the bank, the supplier provides a credit guarantee for the retailer. Two credit guarantee schemes are proposed, guarantee for quality and guarantee for both quality and sales (GQS). The partners' optimal decisions under different schemes are derived via Stackelberg game. As a critical influential factor to determine the financing cost, the loan interest rate is carefully examined with respect to its effect on the strategies of both partners. Furthermore, the influence of loss aversion on the participants' decisions is examined. Based on the theoretical analysis and numerical experiments, the following conclusions are drawn. First, the retailer's optimal order quantity is independent of the supplier's decision on the technology level, whereas the supplier's optimal decision is affected by the retailer's order size. Second, financing is not always attractive to the retailer, and is adopted only with a reasonably lower loan interest rate. Third, the GQS scheme is a win–win strategy for the supply chain if the loan interest rate is relatively high. Finally, the loss‐averse strategy is more robust for the retailer when the demand is volatile and unpredictable.

Two kinds of incentive strategies, cost-sharing and penalty, are examined in dealing with production disruption, with consideration of production process reliability as an endogenous factor for a two-echelon supply chain. Based on the Stackelberg game framework, we derive the optimal decisions of supply chain partners and compare their expected profits with different strategies. Considering the uncertain demand and the retailer’s preference against the risk, we further analyze how the partners’ decisions and the retailer’s expected profit are influenced by the feature of loss aversion. From theoretical analysis and numerical experiments, we find that: (1) overall, a penalty strategy dominates that of cost-sharing for the retailer, whereas the reverse applies with respect to the manufacturer; (2) a penalty strategy may outperform a cost-sharing strategy for the whole supply chain, depending on demand; and (3) a reasonable aversion against risk can help the retailer to achieve a more robust result when a penalty strategy is adopted under volatile and unpredictable demand.