An EPQ model under partial trade credit financing with credit sensitive demand

Trade credit is an increasingly important payment behavior in real business transactions. In practice, the supplier allows a certain fixed credit period to settle the account for stimulating retailer´s demand. From the retailer´s viewpoint, during the credit period before payment must be made, he/she can sell the items and continue to accumulate revenue and earn interest. The main purpose of the present paper is to explore the impact of credit period on the retailer´s demand, which may be instant or delayed. An EPQ (Economic Production Quantity) model under the condition of two echelon trade credit with credit sensitive demand has been analyzed. The optimal credit period offered by the retailer and the optimal replenishment time has been jointly evaluated in order to maximize retailer´s profit.