Retailer's Optimal Order and Payment Policies with Two-Level Trade Credit where Up-Stream Trade Credit Linked to Order Quantity

This paper extends the previous EOQ models with two-level trade credit to reflect the real-life situations by incorporating the following concepts: (1) the supplier offers the retailer an up-stream trade credit linked to order quantity, and (2) the dispensable assumptions of the up-stream trade credit is longer than the down-stream trade credit (N <; M) and the interest charged per dollar is larger than or equal to the interest earned per dollar (I
_c
≥ I
_c
) are relaxed. Moreover, if the delay in payment is premised, the retailer adopts Ho's (2011) type of payment. We then study the necessary and sufficient conditions for finding the optimal solution and establish theoretical results to obtain the solution. Finally, numerical examples are given to illustrate the theoretical results and provide the managerial insights.