Final answer:
Rationing schemes allocating production based on retailer orders typically increase the bullwhip effect by causing larger fluctuations in demand at all levels of the supply chain. Companies can reduce imperfect information by sharing real-time data and forecasting demand more accurately.
Step-by-step explanation:
Rationing schemes that allocate limited production in proportion to the orders placed by retailers typically increase the bullwhip effect. The bullwhip effect refers to the phenomenon where minor fluctuations in demand at the retail level cause progressively larger fluctuations in demand at the wholesale, distributor, manufacturer, and raw material supplier levels. When retailers place orders that are disproportionate to the actual consumer demand, this can lead to over- or under-production, causing inefficiencies and increased inventory costs throughout the supply chain.
To reduce the risk of imperfect information, which exacerbates the bullwhip effect, companies can share real-time sales data, implement advanced demand forecasting techniques, or establish strategic partnerships for information sharing. Imperfect information can lead to misjudgments regarding price, quantity, and quality, affecting all parts of the supply chain and ultimately the consumer. Utilizing the demand and supply framework, This can result in a higher price due to artificial scarcity, a higher or lower quantity demanded based on perceived availability, and an inappropriate quantity supplied that does not match real consumer needs.