Bullwhip effect in pricing under different supply chain game structures

Bullwhip effect in pricing (BP) refers to the amplified variability of prices in a supply chain. This paper analyzes the occurrence of BP under three game scenarios (e.g. a simultaneous, a wholesale-leading, and a retail-leading) for three types of demand functions (e.g. a log-concave, an isoelastic, and a negative exponential). Cost pass-throughs and BP ratios are calculated analytically for an N-stage supply chain, and then the price fluctuations in various supply chain game structures are illustrated through simulations. The results indicate that in the case of optimal markup pricing games, the occurrence of BP depends on the demand functions. This study also shows that, BP occurs in varying magnitudes for different types of games. Finally, a relation between price variations and corresponding markup profits are also discussed.