This paper focuses on the cooperation mechanism between two retailers.
To reduce the average processing cost, the supplier usually sets a
threshold for trade credit to stimulate retailers' orders. Retailers can
enjoy permissible delay in payments only when their order quantities are
more than or equal to the given threshold. However, considering the
diversity of retailers, the motivation effect of the threshold may be
limited. To resolve the problem, the supplier can additionally provide
retailers with a joint ordering policy under which two retailers can
make delayed payments as long as their total order quantity meets the
required threshold. Thus, the two retailers should decide whether to
place a joint order or not and determine their respective order
quantities simultaneously. We provide a mutually acceptable
order-allocation scheme for retailers, and determine the optimal payment
methods for them. In addition, an optimal threshold is identified for
the supplier to maximize the total order quantity of retailers. Based on
this, some managerial insights are obtained. A numerical experiment is
performed to illustrate the validity of the model.