Optimal Financing Decision with Financial Constraints for a Manufacturer in a Low-Carbon Supply Chain

Abstract

In this paper, bank financing (BF) and trade credit financing (TCF) are viable. We investigate the financing choice problem for an emission-dependent manufacturer with capital constrained. And the members of the supply chain each pursue their profit maximization. In the existing literature on the financing supply chain, enterprises and consumers are becoming more and more aware of environmental protection. A growing number of manufacturers produce low-carbon products like environment-friendly bags through a green supply chain system. We use the Stackelberg game to study the equilibrium financing choice and optimal decisions. We also perform numerical analysis to verify the impact of certain parameters on financing decisions. The results show that no direct relationship between the degree of carbon reduction and the total amount of carbon emissions as defined by the government. Besides, when the trade credit interest rate is higher than the bank interest rate, the manufacturer will choose bank financing. When the credit interest rate is lower than a certain threshold, the retailer provides trade credit financing. Our study also provides useful insights for managers to understand and make financing decisions in the low-carbon supply chain with the capital-constrained manufacturer.