Abstract:

The significance of credit insurance magnifies with the intensifying of de-globalization and the attendant instability of the supply chain. Meanwhile， the rise of the platform economy renders retailer-dominated supply chains a new norm. In combination， the coordination role of insurance along a retailer-dominated supply chain is explored with optional external bank credit or internal trade-credit financing. A model builds on a newsvendor Stackelberg game incorporating insurance participation between the supplier and the vendor， expanding the trade-credit literature under market demand uncertainty. The main results in this study indicate that the coordination role of credit insurance is evident in trade-credit financing internal to the supply chain while insignificant in bank credit which is mainly exogenous to the supply chain. Specifically， when the budget-constrained vendor is financed by trade credit， credit insurance can reduce the supplier’s wholesale price and increase the retailer’s order volume， better supply chain coordination， and improve profits for both suppliers and retailers. Resultantly， credit insurance can improve the supply chain’s efficiency to the level of Stackelberg equilibrium but below the chain coordination equilibrium. When the credit insurance protection is greater than the premium expenditure in extremity， the in-dominance retailer is likely to share the insurance cost or even bears all the insurance costs. Regarding policy implications， our results suggest customized and cost-sharing credit insurance to stabilize the supply chain in the post-COVID-19 era.

Key words: trade credit, credit insurance, in-dominance retailer, newsvendor problem, financing constraints