Abstract:Under the assumption of trade credit in a supply chain with one supplier and one capital-constrained retailer, two coordination mechanisms are studied, including wholesale price contract and revenue-sharing contract. It is shown that, using trade credit and wholesale price contract fails to coordinate the supply chain. However, under certain condition of retailer’s initial capital, the revenue-sharing based on trade credit can fully coordinate the supply chain and arbitrarily allocates the supply chain’s profit. The relationship between parameters for revenue sharing contract is analyzed. The revenue sharing ratio increases with the initial capital, and the wholesale price decreases with the initial capital. Finally, a numerical example demonstrates the conclusion.