Behavioral Causes of the Bullwhip Effect and the Observed Value of Inventory Information

Rachel Croson and Karen Donohue ()
Additional contact information
Karen Donohue: Department of Operations and Management Science, The Carlson School of Management, University of Minnesota, Minneapolis, Minnesota 55455-9940

Management Science, 2006, vol. 52, issue 3, 323-336

Abstract: The tendency of orders to increase in variability as one moves up a supply chain is commonly known as the bullwhip effect. We study this phenomenon from a behavioral perspective in the context of a simple, serial, supply chain subject to information lags and stochastic demand. We conduct two experiments on two different sets of participants. In the first, we find the bullwhip effect still exists when normal operational causes (e.g., batching, price fluctuations, demand estimation, etc.) are removed. The persistence of the bullwhip effect is explained to some extent by evidence that decision makers consistently underweight the supply line when making order decisions. In the second experiment, we find that the bullwhip, and the underlying tendency of underweighting, remains when information on inventory levels is shared. However, we observe that inventory information helps somewhat to alleviate the bullwhip effect by helping upstream chain members better anticipate and prepare for fluctuations in inventory needs downstream. These experimental results support the theoretically suggested notion that upstream chain members stand to gain the most from information-sharing initiatives.

Keywords: supply chain management; bullwhip effect; behavioral experiments; information sharing; dynamic decision making (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (112)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.1050.0436 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:52:y:2006:i:3:p:323-336

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().