Decision Sciences Volume 42 Number 4 November 2011 C  2011 The Authors Decision Sciences Journal C  2011 Decision Sciences Institute An Alternative Theoretical Explanation and Empirical Insights into Overordering Behavior in Supply Chains * Tarikere T. Niranjan † , Stephan M. Wagner, and Christoph Bode Department of Management, Technology, and Economics, Swiss Federal Institute of Technology Zurich, Scheuchzerstrasse 7, 8092 Zurich, e-mail: ttniranjan@ethz.ch, stwagner@ethz.ch, cbode@ethz.ch ABSTRACT The beer game and the supply line underweighting theory are central to our knowl- edge of decision making in dynamic environments such as supply chains. The core of these theories is that people are incapable of recognizing the pipeline inventory and this is the main cause of overordering and dysfunctional behavior. This arti- cle identifies lacunae in the theoretical and empirical foundations of extant litera- ture and proposes an alternate explanation, a “correction model,” explaining why overreactions occur. We adopt a multi-method research design, comprising a field case study and laboratory experiments, to ground our findings. [Submitted: July 19, 2010. Revisions received: December 8, 2010; March 14, 2011. Accepted: March 28, 2011.] Subject Areas: Dynamic Decision Making, Misperception of Feedback, and Supply Chain Management. INTRODUCTION Dynamic decision tasks are those in which decisions made today alter the state of the system and thus affect information that decisions to be made tomorrow will be based on (Diehl & Sterman, 1995). The feedback loop connecting decisions and environmental cues embodies the dynamic nature of the system. Experiments have shown that people learn poorly when they are delayed in receiving feedback about the outcomes of their actions. These studies have been conducted and applied to a variety of settings such as firefighting (Brehmer, 1995), inventory control (Sterman, 1989a, 1989b; Davis & Kottemann, 1995), and management of software development teams (Sengupta & Abdel-Hamid, 1993). This substantial body of knowledge rests on the supply line underweighting (SLU) theory. At its core, ∗ We thank B. A. Metri, Vijay Aggarwal, Nagananda Kumar, and Srinagesh Gavirneni for their input during the initial stages of this research. We are also grateful to Dinesh Sharma and his colleagues at the case study company for their support. Finally, we thank the editorial team for their help in greatly improving the quality of this article. † Corresponding author. 859