Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/181361 
Year of Publication: 
2017
Series/Report no.: 
KCG Working Paper No. 6
Publisher: 
Kiel Centre for Globalization (KCG), Kiel
Abstract: 
This paper constructs a model of a supply chain to examine how demand volatility is passed upstream through the chain. In particular, we seek to determine how likely it is that the chain experiences a bullwhip effect, where the variance of the upstream firms’ production exceeds the variance of the upstream firm’s sales. We show that the bullwhip effect is more likely to occur and is greater in size in supply chains in which inventory control is centralized rather than decentralized, that is, exercised by the downstream firm.
Subjects: 
bullwhip effect
production smoothing
inventory
supply chain
demand uncertainty
stockout avoidance
JEL: 
L22
L14
M11
Document Type: 
Working Paper

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