Co-opetition Matters: The Value of Strategic Settlement Delay in Global Trade Negotiations

Abstract

The emergence of the Real-Time Payment (RTP) system has revolutionized payment transfers, enabling swift completion within seconds and facilitating real-time settlement. With real-time settlement, the payments are transferred without any delays, benefiting the supplier but potentially adversely affecting the retailer in B2B transactions. However, we observe that while some retailing giants, like Walmart, embrace the RTP system for real-time settlement, only a few suppliers settle payments in real-time. Therefore, this paper aims to examine the impact of payment settlement methods and uncover the motivations of suppliers and retailers regarding real-time settlement and traditional delayed settlement. We consider a co-opetitive supply chain where a supplier sells goods through a retailer who purchases and resells the supplier's products, while simultaneously establishing a direct channel. The contract negotiation between the supplier and retailer is formulated by the generalized Nash bargaining framework. Our analysis reveals that their co-opetitive relationship plays the key role. In comparison to the traditional delayed settlement, when the supplier's relative unit cash opportunity cost exceeds that of the retailer, the real-time settlement strengthens cooperation within the reselling channel while simultaneously harming the direct-selling channel. Surprisingly, our findings indicate that the real-time settlement could harm the supplier's profit when the supplier possesses moderate or very low bargaining power, and the relative unit cash opportunity cost is moderate. Conversely, the real-time settlement may benefit the retailer when the relative unit cash opportunity cost is high. Notably, when the supplier's relative unit cash opportunity cost is high, both the retailer and supplier align their incentives for settling payment in real time. We further explore the impact of the merchant discount fee charged to the supplier under the traditional banking system and the commission cost associated with the direct channel on a platform, finding the main results remain qualitatively unchanged.

Keywords: Real-time settlement, Galobal operations, Bilateral negotiation, Strategic timing game, Channel co-opetition