Behavioral Causes of the Bullwhip Effect and the Observed Value of Inventory Information
AbstractThe 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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 52 (2006)
Issue (Month): 3 (March)
supply chain management; bullwhip effect; behavioral experiments; information sharing; dynamic decision making;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Cary Deck & Nikos Nikiforakis, 2012.
"Perfect and imperfect real-time monitoring in a minimum-effort game,"
Springer, vol. 15(1), pages 71-88, March.
- Cary Deck & Nikos Nikiforakis, 2010. "Perfect and Imperfect Real-Time Monitoring in a Minimum-Effort Game," Working Papers 10-18, Chapman University, Economic Science Institute.
- Agarwal, Rajshree & Croson, Rachel & Mahoney, Joseph T., 2007. "Decision Making in Strategic Alliances: An Experimental Investigation," Working Papers 07-0108, University of Illinois at Urbana-Champaign, College of Business.
- Anne Coughlan & S. Choi & Wujin Chu & Charles Ingene & Sridhar Moorthy & V. Padmanabhan & Jagmohan Raju & David Soberman & Richard Staelin & Z. Zhang, 2010. "Marketing modeling reality and the realities of marketing modeling," Marketing Letters, Springer, vol. 21(3), pages 317-333, September.
- Akkermans, H.A. & Voss, C., 2013. "The service bullwhip effect," Open Access publications from Tilburg University urn:nbn:nl:ui:12-5905706, Tilburg University.
- Strohhecker, Jürgen & Größler, Andreas, 2013. "Do personal traits influence inventory management performance?—The case of intelligence, personality, interest and knowledge," International Journal of Production Economics, Elsevier, vol. 142(1), pages 37-50.
- Ding, Huiping & Guo, Baochun & Liu, Zhishuo, 2011. "Information sharing and profit allotment based on supply chain cooperation," International Journal of Production Economics, Elsevier, vol. 133(1), pages 70-79, September.
- Ancarani, A. & Di Mauro, C. & D'Urso, D., 2013. "A human experiment on inventory decisions under supply uncertainty," International Journal of Production Economics, Elsevier, vol. 142(1), pages 61-73.
- Uskonen, Jukka & Tenhiälä, Antti, 2012. "The price of responsiveness: Cost analysis of change orders in make-to-order manufacturing," International Journal of Production Economics, Elsevier, vol. 135(1), pages 420-429.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc).
If references are entirely missing, you can add them using this form.