A supply chain model under credit period and price dependent demand: A Stackelberg Approach

In many industrial practices, market demand is likely affected by the trade credit policy. This study aims to develop a retailersupplier non-cooperative replenishment model with credit length dependent demand and default risk to determine the best credit period in a supplier-Stackelberg game. The perks of credit policy include attracting new buyers and avoiding long-term price rivalry. This study was conducted under three distinct decision-making scenarios. The first section demonstrates the optimal outcomes for decentralized and centralized decisions when trade credit is unavailable. Second, using a supplier Stackelberg method, we construct the existence and uniqueness requirements for the retailer and the supplier optimal solutions. In this supplier Stackelberg strategy, the retailer sets the best lot-size, while the supplier chooses the best credit length. A series of theorems and corollaries were designed to determine the best response under these conditions. In order to demonstrate the proposed method and the anticipated outcomes, the sensitivity analyses of few examples has been carried out. Also the decision variable’s characteristics, obtained from the sensitivity analysis, have been figure out. Additionally, this research shows a high correlation between the demand, credit length and supply chain’s profit.