Hybrid financing in a dual-channel supply chain with asymmetric demand information

Abstract

This study delves into the interaction between hybrid financing and asymmetric demand information within a dual-channel supply chain. In this setup, the supplier directly sells to customers and also through a capital-constrained retailer. We investigate a unique financing approach involving a blend of bank loans and supplier equity investment to support the retailer's operational (procurement and marketing) activities. Analyzing the equilibrium strategies under both symmetric and asymmetric information settings yields intriguing insights. In the case of symmetric information, we find that the retailer's equilibrium order quantity decreases with the potential market size under hybrid financing, contrary to traditional notions. When asymmetric information is present, a higher acceptance of supplier equity investment by the retailer tends to lead to order quantity distortion downward, increasing signaling costs. Furthermore, a greater proportion of supplier equity investment prompts the retailer to order more products, ultimately boosting profits for both the retailer and supplier. This suggests that supplier equity investment can enhance supply chain efficiency and alleviate the double marginalization effect.