332 / 2024-04-24 15:09:32

Entry Threshold Setting for Supplier’s Green Credit Financing in a Retailer-led Supply Chain

green credit financing; capital-constrained; government subsidy; Pareto improvement

Green suppliers authorized by core enterprises in supply chains can obtain green credit financing (GCF) with cost advantages from banks. In practice, core enterprises are usually faced with the difficulties of whether they should cooperate with banks to provide GCF and how to set the greenness entry thresholds for their suppliers in such business. In this paper, we study a GCF system consisting of a bank, a large retailer and a capital-constrained supplier. The retailer cooperates with the bank to set a greenness entry threshold for the supplier’s GCF. We find that the supplier will choose GCF only when the GCF entry threshold set by the retailer is lower than a critical value, otherwise it will still use TCF (tradition credit financing). When the retailer is the dominant player in the game, there is a unique equilibrium between the two sides of the supply chain, under which GCF will be implemented and the supply chain obtains Pareto-improvement and greenness enhancement. As another participant in the GCF system, the bank can also benefit from the increase of loan scale brought by the rise of product greenness and green demand, as long as it sets a reasonable GCF interest rate, i.e., no lower than a certain threshold. When the GCF interest rate of the bank is below such a threshold, it is necessary to introduce external government incentives. Our results show that the government will not choose to subsidize the bank if and only if the supplier’s cost coefficient of green investment is extremely high meanwhile the bank’s GCF interest rate is extremely low; otherwise, it will have no hesitation in providing subsidies (transfer payments) to the bank, which will bring all the three GCF members’ profits a Pareto-improvement, as well as achieving a higher social welfare compared with TCF. Finally, we extend the problem to consider a new formulation of the consumer surplus and a new game sequence between the GCF members, and the main conclusions are also verified by a large number of numerical experiments.