Financing equilibrium of the manufacturer-dominated channel considering quantity effect of manufacturer's green effort

Abstract

This study addresses a critical gap in green supply chain management by examining how capital constraints and trade credit financing affect manufacturer's green effort decisions and supply chain performance. While existing literature assumes green efforts uniformly increase demand, this paper develops a manufacturer-dominated supply chain model incorporating both dual effects of green effort, analyzing optimal decisions under prepayment and delay in payment.Our analysis reveals three key insights: 1) Prepayment policies serve as an effective capital constraint prevention mechanism, with the ability to completely eliminate manufacturer capital constraints when the retailer possesses sufficient capital. The effectiveness depends on retailer capital levels and production costs, where higher production costs make prepayment conditions more readily achievable. 2) The equilibrium becomes highly contingent on manufacturer capital levels when the retailer lacks sufficient capital, resulting in three distinct strategic outcomes and revealing a ``capital trap'' phenomenon under delay in payment arrangements, where financially stronger retailers may face disadvantages while capital-constrained retailers benefit disproportionately. 3) Quantity effects create asymmetric impacts across different financing structures, where prepayment financing remains unaffected by quantity effects in regional selection, while delay in payment arrangements experience substantial impacts on manufacturer capital situations, with higher environmental market sensitivity shifting financing burdens between partners.