This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window
Open in New Tab
Open in same window
American Economic Journal: Microeconomics: Vol. 3 No. 1 (February 2011)
AEJ: Micro Volume. 3, Issue 1 | 
Previous ArticleNext Article
Sign up for Email Alerts Follow us on Twitter Subscription Information
(Institutional Administrator Access)
AEJ: Micro Forthcoming Articles
Full-text Article
View Comments on This Article (0) | Login to post a comment
Previous ArticleNext Article
Expand
Quick Tools:
Print Article Summary Email Link to this Article Export CitationSign up for Email Alerts Follow us on Twitter Subscription Information
(Institutional Administrator Access)
Explore:
AEJ: Micro Forthcoming Articles
Ensuring Sales: A Theory of Inter-firm Credit
Article Citation
Daripa, Arup, and
Jeffrey Nilsen. 2011. "Ensuring Sales: A Theory of Inter-firm Credit."
American Economic Journal: Microeconomics,
3(1): 245-79.
DOI: 10.1257/mic.3.1.245
DOI: 10.1257/mic.3.1.245
Abstract
We propose a simple theory to account for the prevalence of interfirm credit at an interest rate of zero. A downstream firm trades off inventory holding costs against lost sales. Lost final sales impose a negative externality on the upstream firm. The solution requires a subsidy limited by the value of inputs. Allowing the downstream firm to pay with a delay is precisely such a solution. A reverse externality accounts for the use of prepayment. We clarify how input prices
vary with such policies, and when trade credit/prepayment is more efficient than pure input price adjustments. (JEL D21, D62, D92, G31, L25)
Article Full-Text Access
Full-text Article
Authors
Daripa, Arup (Birkbeck, U London)
Nilsen, Jeffrey (American U Bulgaria)
Nilsen, Jeffrey (American U Bulgaria)
JEL Classifications
D21: Firm Behavior: Theory
D62: Externalities
D92: Intertemporal Firm Choice and Growth, Financing, Investment, and Capacity
G31: Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
L25: Firm Performance: Size, Diversification, and Scope
D62: Externalities
D92: Intertemporal Firm Choice and Growth, Financing, Investment, and Capacity
G31: Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
L25: Firm Performance: Size, Diversification, and Scope
Comments
View Comments on This Article (0) | Login to post a comment
