Ration gaming and the bullwhip effect

Robert L. Bray, Yuliang Yao, Yongrui Duan, Jiazhen Huo

Research output: Contribution to journalArticle

3 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)453-467
Number of pages15
JournalOperations Research
Volume67
Issue number2
DOIs
StatePublished - Jan 1 2019

Keywords

  • (s, S) inventory policies
  • Bullwhip effect
  • Dynamic discrete choice
  • Empirical supply chain management
  • Ration gaming
  • Structural estimation

ASJC Scopus subject areas

  • Computer Science Applications
  • Management Science and Operations Research

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