Manufacturer financing strategies and retail platform traffic investment in a platform economy

Purpose In the platform economy, retail platforms generate demand via traffic investment, often transferring financial pressure to capital-constrained manufacturers. This study aims to jointly examine the capital-constrained manufacturer's financing strategy selection (debt vs. hybrid debt-equity) and the retail platform's endogenous traffic investment decisions. Design/methodology/approach We develop a two-echelon supply chain model consisting of a capital-constrained manufacturer as the leader and his follower, a capital-rich retail platform, comparing pure credit financing from a bank or retail platform (bank credit financing and RCF) and hybrid debt-equity financing (HF-BE and HF-RE). We examine the platform-led setting and assess robustness with a nonlinear demand function. Findings The manufacturer's preference for platform financing is non-monotonic; he may revert to the bank's participation even when the rate is excessively high. Without financing participation, the platform wishes the manufacturer to introduce equity financing; with participation, it depends on the ratio because its profit follows an inverted U-shape with equity like the manufacturer. Equity financing induces a counterintuitive market expansion dominated by the low-price effect. Products with heterogeneity in terms of cost and traffic dependency have different applicable strategies for traffic investment and financing. Originality/value This study integrates financing strategies with endogenous demand creation (traffic investment) into a unified game framework. It reveals how equity dilution interacts with traffic investment to reshape financing preference, pricing and market scale, offering new insights into financing beyond interest-rate comparison.