Evaluating Trust, Trustworthiness and Bullwhip Effect: A Three-Echelon Supply Chain Interactive Experiment

Abstract

Trust is essential in supply chain management, and it maintains relationships among members in a supply chain. Moreover, trustworthiness influences an individual’s behavior, which is related to trust-building. Therefore, this study aims to investigate trust and trustworthiness in a three-echelon supply chain based on the bullwhip effect, trust diffusion, and suppliers’ production adjustment. This study conducts experiment involving 36 participants. Two tasks are performed with unknown and known (high/low) partners’ trustworthiness levels. The results present three findings: a) The bullwhip effect could be controlled to a lower level when partners in a supply chain were with high trustworthiness but not those with low trustworthiness. b) Trust diffusion is observed in both high and low trustworthiness cases, which could be useful for developing long-term trust relationships. c) Suppliers are more likely to distrust low trustworthiness partners and adjust their production strategies relative to the high trustworthiness partners. To sum up, this study establishes a connection between trust and the bullwhip effect through experimental results. Additionally, this suggests that trustworthiness is vital information in a supply chain for enhancing performances, especially for upstream members, which is one of the critical elements for information sharing in a supply chain.