BANK'S INTEREST RATE DECISION WHEN FINANCING WORKING CAPITAL-CONSTRAINED NEWSVENDOR RETAILER

The newsvendor models are very widely used in existing literature. When facing working capital constraint, newsvendor retailer would borrow from the bank. This paper investigates the properties of bank's interest rate. We focus on two factors collateral assets and bank's risk attitude. We study the impact of them on bank's interest rate decision and find both of collateral assets and bank's risk attitude play important roles in bank's interest rate decision. The bounds of bank's interest rate are also explored. We demonstrate the findings with cases where the demand follows the normal distribution.