Noel Watson

Harvard Business School

Abstract: Supply chains can be incredibly complex with numerous moving parts. Seeking to provide prescriptive recommendations, many academic papers on supply chain management pursue an optimizing approach given the assumption of a completely rational decision maker. In reality, managers do not act as completely rational agents. For example, the well-known phenomenon in supply chain management and economics referred to as the bullwhip effect is usually considered, despite papers citing rational causes for its existence, the result of supply chain misbehavior/inefficiency. We look at an attempt to model the effects of less than completely rational managers on inventory in a supply chain and discuss coordination so as to mitigate these effects.