Ration Gaming and the Bullwhip Effect

Robert L. Bray (), Yuliang Yao (), Yongrui Duan () and Jiazhen Huo ()
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Robert L. Bray: Department of Operations Management, Kellogg School of Management, Northwestern University, Evanston, Illinois 60208;
Yuliang Yao: Department of Management, College of Business and Economics, Lehigh University, Bethlehem, Pennsylvania 18015;
Yongrui Duan: Department of Management Science and Engineering, School of Economics and Management, Tongji University, 200092 Shanghai, China
Jiazhen Huo: Department of Management Science and Engineering, School of Economics and Management, Tongji University, 200092 Shanghai, China

Operations Research, 2019, vol. 67, issue 2, 453-467

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 the long-standing 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 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (10)

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