Applying Game Theory to Credit Guarantee Mechanism on Supply Chain Sourcing Model

Chiang, M. H., Wu, C. F., and Ye, M. S. 2018. Applying Game Theory to Credit Guarantee Mechanism on Supply Chain Sourcing Model. NTU Management Review, 28 (1): 43-86. doi:10.6226/NTUMR.201804_28(1).0002

Ming-Huang Chiang, Professor, Department of Business Administration, National Taiwan University
Cheng-Feng Wu, Lecturer, School of Logistics & Engineering Management, Hubei University of Economics, Researcher at Institute for Development of Cross-strait Smaill and Medium Enterprises, Hubei
Ming-Shian Ye, Master, Graduate Institute of Business Administration, National Taiwan University

Abstract

Small and medium enterprises (SME) have been a major force in Taiwan. They play the part as a bridge between larger enterprises. In short, SMEs are essential foundations for the economic development in Taiwan. However, due to unhealthy financial/accounting systems which result in the risk of loaning, SMEs are required to provide collateralization as a guarantee when applying for financial support. This study is aimed to discuss the credit guarantee mechanism. The manufacturer provides collateralization for upstream SMEs as well as the expected return after the loan is lent by the bank, in order to reduce the risk of loaning and to make loaning easer; thus, achieving a win-win situation for the supply chain. A leader-follower game is introduced in this paper, with the upstream suppliers as a follower, and the downstream manufacturer as the leader. Both sides of parties are seeking to maximize profit and build up their supply chain purchase model. Backward induction is applied to obtain the optimal decision and profit maximization; additionally, certain important factors in the sensitivity analysis are discussed. The results provide references and solutions to the loaning decision making process for all parties in supply chain financing. 


Keywords

small and medium enterprisecredit guaranteesupply chaingame theory


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