Please use this identifier to cite or link to this item: https://ir.iimcal.ac.in:8443/jspui/handle/123456789/4647
Title: Financing models for an online seller with performance risk in an E-commerce marketplace
Authors: Rath, Sambit Brata
Basu, Preetam
Mandal, Prasenjit
Paul, Samit
Keywords: E-commerce
Supply chain finance
Performance risk
Contract
Game theory
Issue Date: Nov-2021
Publisher: Transportation Research Part E: Logistics and Transportation Review
Series/Report no.: Vol. 155;
Abstract: Third-party sellers on e-commerce marketplaces (e.g., Amazon and Alibaba) have been primarily dependent on conventional financing modes such as bank credit financing (BCF) to meet their working capital requirements. Many of these platforms have recently started novel financing programs (platform credit financing, PCF) for the sellers under the umbrella of Supply Chain Finance. For example, Amazon provides unsecured loans to third-party sellers on its platform under the Amazon lending program. These loans are risky for the platform. If the seller is unable to fulfill customer’s orders because of some internal inefficiencies (performance risk), the platform loses the loan amount and incurs a goodwill cost among its customer base. In this paper, we develop a series of game-theoretic models to analyze and compare BCF and PCF for a cash-constrained third-party seller on an e-commerce marketplace. We derive optimal interest rates that the platform may charge the seller depending on its performance risk. We derive conditions under which either BCF or PCF could be more profitable for the seller. We introduce innovative contracts (Guaranteed Demand Increment Contract and Lending Rate Matching Contract initiated by the platform and Lumpsum Transfer Contract initiated by the seller) that incentivize the seller or platform to act in a mutually beneficial way. Our analysis shows that these contracts achieve win–win outcomes and increase the total supply chain profit.
Description: Biosketch: Sambit Brata Rath, Preetam Basu & Prasenjit Mandal, Operations Management Group, Indian Institute of Management Calcutta, Diamond Harbor Road, Kolkata 700104, India; Samit Paul, Finance and Control Group, Indian Institute of Management Calcutta, Diamond Harbor Road, Kolkata 700104, India.
URI: https://ir.iimcal.ac.in:8443/jspui/handle/123456789/4647
https://doi.org/10.1016/j.tre.2021.102468
ISSN: 1366-5545 (online)
Appears in Collections:Operations Management

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