Optimal Supply Chain Decision With Pre- and Aftersales Services and Capital Constraints

Abstract

This paper examines a two-tier supply chain system where the manufacturer leads by managing aftersales service, and the retailer follows by handling presales service. To address the manufacturer's capital constraints, we develop three game-theoretic models: a model without capital constraints, another model with external financing under capital constraints, and yet another model with internal financing under capital constraints. We identify optimal financing strategies across these scenarios through comparative analysis. The findings reveal that external financing does not improve the level of presales service provided by the retailer. Under external financing, high consumer price sensitivity tends to increase product retail prices. Furthermore, wholesale prices are higher when financing is involved than in scenarios without financing. Interestingly, regardless of the financing model, higher consumer sensitivity to the retailer's presales service reduces wholesale prices, paradoxically benefiting the profits of both the manufacturer and retailer. An increase in the manufacturer's initial capital consistently enhances the manufacturer's profitability but may negatively impact the retailer's profits under internal financing. The manufacturer prefers internal financing, regardless of whether the manufacturer faces rising financing interest rates or increased aftersales service investments.