Bullwhip and Reverse Bullwhip Effects under the Rationing Game
Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management
Lawrence V. Snyder
Lehigh University - Department of Industrial and Systems Engineering
Zuo-Jun Max Shen
University of California, Berkeley - Department of Industrial Engineering & Operations Research (IEOR)
August 20, 2008
When an unreliable supplier serves multiple retailers, the retailers may compete with each other by inflating their order quantities in order to obtain their desired allocation from the supplier, a behavior known as the rationing game. In this paper, we provide the formal condition of the existence of the bullwhip effect (BWE) under the rationing game when the mean demand changes over time. Moreover, when the capacity information is shared and the capacity reservation mechanism is applied, we provide the condition when the reverse bullwhip effect (RBWE) occurs upstream, a consequence of the disruption caused by the supplier. In addition, we show that the smaller unit reservation payment leads to the severe [R]BWE. Finally, we find that capacity information sharing does not necessarily mitigate the [R]BWE and that it may reduce the profitability of the supply chain as a whole.
Number of Pages in PDF File: 32
Keywords: rationing game, bullwhip effect, reverse bullwhip effect, supply uncertainty, order variance
Date posted: August 20, 2008 ; Last revised: March 21, 2012
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