Bullwhip and reverse bullwhip effects under the rationing game |
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| Authors: | Ying Rong Lawrence V Snyder Zuo‐Jun Max Shen |
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| Institution: | 1. Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai, China;2. Industrial and Systems Engineering Department, Lehigh University, Bethlehem, Pennsylvania;3. Department of Industrial Engineering and Operations Research and Department of Civil and Environmental Engineering, Berkeley, California |
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| Abstract: | 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. We introduce capacity information sharing and a capacity reservation mechanism in the rationing game and show that a Nash equilibrium always exists. Moreover, we provide conditions guaranteeing the existence of the reverse bullwhip effect upstream, a consequence of the disruption caused by the supplier. In contrast, we also provide conditions under which the bullwhip effect does not exist. In addition, we show that a smaller unit reservation payment leads to more bullwhip and reverse bullwhip effects, while a large unit underage cost results in a more severe bullwhip effect. © 2017 Wiley Periodicals, Inc. Naval Research Logistics 64: 203–216, 2017 |
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| Keywords: | rationing game bullwhip effect reverse bullwhip effect supply uncertainty order variance |
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