The Impact of Bullwhip Effect in a Highly Volatile Market

The bullwhip effect plays an important role in supply chain management especially in ahighly volatile market where prices change due to many unexpected reasons brought about bydifferent phenomenon such as global warming. Traditionally, one may expect a reduction ondemand when there is a significant move on market price. However, the recent changes onglobal economy imply that the demand for a particular product may significantly increase as theprice goes up in short time and it will come down in long run. There are many evidences toconfirm this theory and as an example we could study the behaviour of price and demand forrice in September, 2008 in Iran’s economy. We present a mathematical model where demand isnot only affected by price but also is influenced by the speed of price changes. Our modelbehaves identical the traditional demand model, where demand is only a function of price andprice elasticity, when price rise is sluggish. However, in the event that there is a big shock inmarket price, the model has completely different attitude. The proposed model examines thebullwhip effect using the Lyapunov exponent