Felipe Leal

How is a supplier cost shock transmitted across the supplier's customers? I study this question using the universe of Chilean electronic invoices, which reports product-level quantities, prices, and payment terms, combined with exchange-rate-driven variation in suppliers' imported-input costs. A one-standard-deviation adverse cost shock reduces delivered quantities by about 3.3% on cash relationships, compared to almost fully protected trade-credit links, while proportional price responses are similar across payment terms. Because invoices record realized deliveries but not desired orders or unfilled demand, this heterogeneity can reflect both buyer demand and supplier allocation. I develop a dynamic relational-contract model that separates these margins. Trade credit relaxes the buyer's financing requirement and can therefore affect desired orders, while continuation surplus can sustain promised delivery even when the supplier has a current incentive to redirect output toward cash sales. For sufficiently small adverse shocks, protected trade-credit orders are filled while cash buyers absorb the residual output contraction. The model maps these buyer and supplier margins into contract-specific delivery responses. Embedding these responses in a multisupplier production network, I derive a sufficient statistic for first-order direct upstream input loss. In a buyer-portfolio exercise, contract-adjusted exposure is 1.65 times the uniform-transmission benchmark for cash portfolios but only about one-third as large for portfolios with more trade credit. Payment terms therefore shape who bears supplier shocks even when prices reveal little differential incidence.