Ration Gaming and the Bullwhip Effect

31 Pages Posted: 27 Sep 2015 Last revised: 13 May 2018

Date Written: April 26, 2018

Abstract

We model a single-supplier, 73-store supply chain as a dynamic discrete choice problem. We estimate the model with transaction-level data, spanning 3,251 products and 1,370 days. We find two interrelated phenomena: the bullwhip effect and ration gaming. To establish the bullwhip effect, we show that shipments from suppliers are more variable than sales to customers. To establish ration gaming, we show that upstream scarcity triggers inventory runs, with stores simultaneously scrambling to amass private stocks in anticipation of impending shortages. These inventory runs increase our bullwhip measures by between 6% and 19%, which corroborates Lee et al.'s (1997) hypothesis that ration gaming causes the bullwhip effect.

Keywords: bullwhip effect; ration gaming; (s, S) inventory policies; dynamic discrete choice; empirical supply chain management; structural estimation.

Suggested Citation

Bray, Robert and Yao, Yuliang and Duan, Yongrui and Huo, Jiazhen, Ration Gaming and the Bullwhip Effect (April 26, 2018). Available at SSRN: https://ssrn.com/abstract=2664930 or http://dx.doi.org/10.2139/ssrn.2664930

Robert Bray (Contact Author)

Northwestern University - Department of Managerial Economics and Decision Sciences (MEDS) ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Yuliang Yao

Lehigh University ( email )

621 Taylor Street
Bethlehem, PA 18015
United States

Yongrui Duan

Tong Ji University ( email )

1239 Siping Road
Shanghai, 200092
China

Jiazhen Huo

Tong Ji University ( email )

1239 Siping Road
Shanghai, 200092
China

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