Demand fluctuation and chaotic behaviour by interaction between customers and suppliers

This paper presents an investigation on simulation of interaction between customers and suppliers in a three-tier supply chain system. In the simulation, customers respond to the price discount offer made by the supplier and the supplier makes adjusts the price according to stock held. The simulation shows that the behaviour of such interaction exhibits deterministic chaos. It is found that the attractors of the model move with the environment and the initial states. Thus, the bifurcating points in such a system are unable to provide a guideline in system design to avoid chaos.