Bullwhip and reverse bullwhip effects under the rationing game

Ying Rong, Lawrence V. Snyder and Zuo‐Jun Max Shen

Naval Research Logistics (NRL), 2017, vol. 64, issue 3, 203-216

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

Date: 2017
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