To provide or not? The financing strategy in the automotive supply chain under asymmetric information

Shanshan Xie; Jiamuyan Xie; Zhixian Zeng; Shanshan Xie; Jiamuyan Xie; Zhixian Zeng

doi:10.3934/jimo.2026027

Journal of Industrial and Management Optimization

2026, Volume 22, Issue 1: 754-775. doi: 10.3934/jimo.2026027

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Research article

To provide or not? The financing strategy in the automotive supply chain under asymmetric information

1.
College of Economics and Trade, Hunan University, Changsha 410079, China
2.
School of Economics and Management, Hunan University of Technology, Zhuzhou 412007, China
3.
Business School, Hunan First Normal University, Changsha 410205, China
4.
Leiyang Branch, Hengyang Tobacco Company, Hunan Tobacco Corporation, Hengyang 421008, China

Received: 15 July 2025 Revised: 25 September 2025 Accepted: 18 December 2025 Published: 25 December 2025
90B06

This study investigates a supply chain involving a financially capable automobile manufacturer with access to demand information and a resource-limited dealer. The well-capitalized manufacturer holds the authority to determine whether to provide dealer financing. If financing is not offered by the manufacturer, a wholesale price contract is executed, compelling the dealer to seek bank financing. Otherwise, if financing is provided, a trade credit contract is signed, and the dealer will typically opt for the manufacturer's seller financing scheme. By developing a signaling model, this paper analyzes the manufacturer's and the dealer's optimal financing strategies under scenarios of demand information symmetry and asymmetry. The findings show that the manufacturer is more inclined to provide financing, while the dealer's financing strategy is significantly influenced by its initial capital level, potentially leading to financing conflicts under information symmetry. Conversely, under information asymmetry, the financing decisions of both the manufacturer and dealer are considerably affected by market interest rates, further exacerbating financing conflicts within a certain range. Notably, the transformation in financing choices primarily stems from the inference effects induced by the manufacturer's transmission of demand signals, which have adverse effects on the manufacturer while benefiting the dealer.
- supply chain management,
- information asymmetry,
- contract,
- supply chain financing,
- signaling game
Citation: Shanshan Xie, Jiamuyan Xie, Zhixian Zeng. To provide or not? The financing strategy in the automotive supply chain under asymmetric information[J]. Journal of Industrial and Management Optimization, 2026, 22(1): 754-775. doi: 10.3934/jimo.2026027

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Abstract

This study investigates a supply chain involving a financially capable automobile manufacturer with access to demand information and a resource-limited dealer. The well-capitalized manufacturer holds the authority to determine whether to provide dealer financing. If financing is not offered by the manufacturer, a wholesale price contract is executed, compelling the dealer to seek bank financing. Otherwise, if financing is provided, a trade credit contract is signed, and the dealer will typically opt for the manufacturer's seller financing scheme. By developing a signaling model, this paper analyzes the manufacturer's and the dealer's optimal financing strategies under scenarios of demand information symmetry and asymmetry. The findings show that the manufacturer is more inclined to provide financing, while the dealer's financing strategy is significantly influenced by its initial capital level, potentially leading to financing conflicts under information symmetry. Conversely, under information asymmetry, the financing decisions of both the manufacturer and dealer are considerably affected by market interest rates, further exacerbating financing conflicts within a certain range. Notably, the transformation in financing choices primarily stems from the inference effects induced by the manufacturer's transmission of demand signals, which have adverse effects on the manufacturer while benefiting the dealer.

References

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