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Bullwhip and reverse bullwhip effects under the rationing game
Author(s) -
Rong Ying,
Snyder Lawrence V.,
Shen ZuoJun Max
Publication year - 2017
Publication title -
naval research logistics (nrl)
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.665
H-Index - 68
eISSN - 1520-6750
pISSN - 0894-069X
DOI - 10.1002/nav.21745
Subject(s) - bullwhip effect , rationing , reservation , microeconomics , order (exchange) , economics , payment , supply chain , computer science , business , supply chain management , marketing , finance , computer network , health care , economic growth
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