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Ration Gaming and the Bullwhip Effect

Author

Listed:
  • 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)

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.

Suggested Citation

  • Robert L. Bray & Yuliang Yao & Yongrui Duan & Jiazhen Huo, 2019. "Ration Gaming and the Bullwhip Effect," Operations Research, INFORMS, vol. 67(2), pages 453-467, March.
    • Handle: RePEc:inm:oropre:v:67:y:2019:i:2:p:453-467
    DOI: 10.1287/opre.2018.1774
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    References listed on IDEAS

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    Cited by:

    1. Victor Aguirregabiria & Francis Guiton, 2022. "Decentralized Decision-Making in Retail Chains: Evidence from Inventory Management," Working Papers tecipa-722, University of Toronto, Department of Economics.
    2. Erkan Bayraktar & Kazim Sari & Ekrem Tatoglu & Selim Zaim & Dursun Delen, 2020. "Assessing the supply chain performance: a causal analysis," Annals of Operations Research, Springer, vol. 287(1), pages 37-60, April.
    3. QU, Zhan & RAFF, Horst, 2023. "Two-part tariffs, inventory stockpiling, and the bullwhip effect," European Journal of Operational Research, Elsevier, vol. 308(1), pages 201-214.
    4. Brett A. Hathaway & Seyed M. Emadi & Vinayak Deshpande, 2021. "Don’t Call Us, We’ll Call You: An Empirical Study of Caller Behavior Under a Callback Option," Management Science, INFORMS, vol. 67(3), pages 1508-1526, March.
    5. Nikolay Osadchiy & William Schmidt & Jing Wu, 2021. "The Bullwhip Effect in Supply Networks," Management Science, INFORMS, vol. 67(10), pages 6153-6173, October.
    6. Marshall Fisher & Marcelo Olivares & Bradley R. Staats, 2020. "Why Empirical Research Is Good for Operations Management, and What Is Good Empirical Operations Management?," Manufacturing & Service Operations Management, INFORMS, vol. 22(1), pages 170-178, January.
    7. Villa, Sebastián, 2022. "Competing for supply and demand: Understanding retailers' ordering decisions," International Journal of Production Economics, Elsevier, vol. 244(C).

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