Inventory management research based on mortgage credit

Not only future demand, transportation cost and storage cost have impact on the inventory decision, but also the financial state of one retailer will restrict the implement of its optimal inventory policy. Given the retailer has moral risk, the paper studies the inventory control problem of retailers with different initial cash. The retailers finance their inventory by stock document mortgage and face the newsvendor's problem. Suppose that they are risk neutral and the storage cost is no smaller than the disposal cost. It is shown that only retailers with smaller mortgage inventory use up all the line of credit and with the loan to value increases, the retailers maybe reserve part of their cash and borrow to increase inventory.