Impact of deferred payment on decisions and coordination in a dual-channel supply Chain with a risk-averse retailer

As the Internet rapidly grows, manufacturers tend to open a direct channel to distribute the products in addition to traditional channels. Meantime, retailers may have difficulty in making immediate payments due to limited capital. Confronting with the channel encroachment, financial pressure, and uncertain demand, retailers may also show a risk averse attitude, which was rarely considered in literature. This study considers a dual-channel supply chain wherein a retailer may be capital constrained and is risk averse. Two scenarios are respectively modeled as a Stackelberg game. One is that the retailer has adequate capital, the other is that the retailer is capital constrained and a manufacturer prefers to provide a deferred payment contract. The results show that the manufacturer present a high degree of willingness to offer the delayed payment to an extremely risk-averse retailer. Further, when such a payment contract is offered, the manufacturer's or even the entire supply chain's profits may decrease. Moreover, a deferred payment contract may benefit the entire supply chain only if the unit production cost is relatively large. Finally, a mixed contract that combines revenue sharing and deferred payment is introduced to achieve the coordination of the dual-channel supply chain.