In a supply chain with a retailer confronted with financial constraints, impacts on profits of the supply chain can be alleviated by increasing the retailer’s efforts and market demand through external financing (bank). If the cost of bank lending is not very high, the capital-constrained retailer can borrow money and make efforts. The reduction of bank interest rates, however, increases the retailer's efforts. We prove that there is a unique equilibrium point between the retailers. We find out the optimal interest rate of the bank and the optimal efforts by the retailer through numerical analysis and verify validity of the results.


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