580 / 2024-04-26 10:46:56

Financing Small and Medium-Size Enterprises via Retail Platforms

operations-finance,supply chain finance,platform financing,retail platforms

This paper examines the impact of loan programs provided by a retail platform to its sellers on sellers' operational and financing decisions, as well as profits for both sellers and the platform, and consumer welfare. Small and medium-sized enterprises (SMEs) on retail platforms often face capital constraints, making loan decisions crucial for platform design. The study develops a two-stage game-theoretic model to analyze how these loan programs affect competition among SMEs and the platform's strategic decisions. Results reveal that platform loan programs can influence the competitive landscape, potentially creating a prisoner's dilemma for sellers. Strategic parameters such as loan credit line and program coverage can mitigate this dilemma but may not fully eliminate it. The findings offer insights for retail platforms on structuring loan programs to align incentives with sellers and for government regulators on understanding the impact of these loan decisions on consumer welfare.