A human experiment on inventory decisions under supply uncertainty

Controlled human experiments are adopted in this paper to investigate the impact of supply uncertainty on buyers' inventory management. The experiments aim at assessing the impact of one specific source of supply chain uncertainty, namely stochastic lead times, on inventory holdings and the extent of the bullwhip effect. Three experimental treatments are run within the framework of the beer game manipulating variability in demand and in lead times. Results confirm that the bullwhip effect arises in all experimental treatments and that the variance of orders is higher under stochastic lead times. Analysis of players' behaviour in the course of the game suggests that players react to higher uncertainty by holding fewer inventories, a behaviour consistent with the predictions of some psychological models of choice under ambiguity.