Business Dynamics and System

Modeling
Chapter 4: Behavior of the
System

Pard Teekasap
Southern New Hampshire
University
 Outline
1.Fundamental modes
– Exponential growth
– Goal seeking
– Oscillation
2.Interaction of the fundamental
modes
– S-shaped growth
– S-shaped growth with overshoot
– Overshoot and collapse
What are the system behaviors
come from?
• The behavior arises from its structure
• Structure consists of the feedback
loops, stock and flow, and
nonlinearities created by the
interaction of the physical and
institutional structure of the system
 Common modes of behavior in
dynamic systems
Exponential Growth Goal Seeking S-shaped Growth

Time Time Time

Oscillation Growth with Overshoot Overshoot and Collapse

Time Time Time

 Exponential Growth
• Arises from positive feedback
• Pure exponential growth has the
constant doubling time
• What is the examples of exponential
growth?
Exponential Growth
structure

State of the
System

Time

+
Net State of the
Increase R
System
Rate
+
 Example of exponential
growth US Real GDP US Prison Population
8000 1200
AverageGrowth
Rate3.45%/year AverageGrowthRate:
DoublingTime-20years 1926-1995:3.5%/year(doublingtime-20years)
Billion 1992 $/Year

Thousand People
1970-1995:6.8%/year(doublingtime-10years)
900

4000 600

300

0 0
1850 1900 1950 2000 1920 1940 1960 1980 2000

World Population Transistors per Chip, Intel Microprocessors

6 6
Average Growth Rate: Average Growth Rate:
1900 - 1950: 0.86%/year (doubling time - 80 years) 33%/year (doubling time: - 2 years)
1950 - 1997: 1.76%/year (doubling time - 40 years)
107 Pentium
Billion People

Transistors/Chip
Pro
6 10
6
4 Million
5
10
4
3 104 Pentium
3
2 10
2
102 486
0 Upper Bound 1965 1975 1985 1995
1900 2000
386 Best Fit Exponential
4004 8080 8086 80286
Lower Bound
0 0
0 400 800 1200 1600 2000 1965 1970 1975 1980 1985 1990 1995 2000
Goal
Goal Seeking

State of the
System

Time

+ State of the Goal

System (Desired
State of System)
B -
Discrepancy
+

Corrective
Action +
 Characteristics of goal
seeking
• If the relationship between the size
the gap and the corrective action is
linear, the rate of adjustment is
exactly proportional to the size of
the gap and the resulting goal-
seeking behavior is exponential
decay
• Pure exponential decay is
characterized by its half life
• What are the examples of goal
seeking behavior?
 Example of goal-seeking
behavior
Semiconductor Fabrication Defect Rate
1500
Nuclear Plant Load Factor
100
Start of TQM Program
80
1000
60

40
500

20

0 0
1987 1988 1989 1990 1991 1978 1980 1982 1984 1986 1988 1990 1992

Television Share of All Advertising, US US Traffic Fatalities per Vehicle Mile

25 25

20 20

15 15

10 10

5 5

0 0
1950 1958 1967 1975 1983 1992 1920 1940 1960 1980 2000
 Oscillation
• The overshooting arises from the
presence of significant time delays
in the negative loop
• However, most real world oscillations
is not perfectly regular. You
shouldn’t expect it to be
• What are the examples of oscillation
behavior?
Oscillation structure
Goal

State of the
System
Time

Measurement,
Reporting, and
Perception
Delays

+ State of the Goal

System (Desired
Action Delay
Delays State of System)
Delay B -
Discrepancy +
Delay
Corrective Administrative and
Action + Decision Making
Delays
 Example of oscillation
behavior
US Real GDP Deviation From Trend
0.4

0.0

-0.4
1850 1900 1950 2000

US Unemployment Rate
Capacity Utilization, US Manufacturing 12
95
10
90
8
85
6

80
4

75 2

70 0
1945 1955 1965 1975 1985 1995 1945 1955 1965 1975 1985 1995
 Process Point
• When you see the behavior, you
should know which type of loop is a
dominant loop
• E.g. if you observe exponential
growth, you know there is at least
one positive feedback (and possibly
more)
• However, there will be many
negative loops as well. But the
positive loops are dominant
S-shaped growth
Carrying Capacity

State of the
System

Time

+
Net
State of the
Increase
R System
+ Rate
+

B -
Fractional Resource Carrying
Net Increase Adequacy Capacity
Rate
+ +
 S-shaped growth condition
• S-shaped growth happens only
1.The negative loops must not include
any significant time delays
2.The carry capacity must be fixed
• Carry capacity is the capability of an
environment to handle that
variable
• What are the examples of S-shaped
behavior?
Example of S-shaped growth
Growth of Sunflowers
300

200

100

0
0 14 28 42 56 70 84
Days

US Cable Television Subscribers Adoption of Cardiac Pacemaker by Physicians

100 100

75 75
% of Households with TV
Subscribing to Cable

50 50

25 25
Cable Subscribers
(Million Households)
0 0
1950 1960 1970 1980 1990 2000 1960 1962 1964 1966 1968 1970 1972
 S-shaped growth with
overshoot
• S-shaped structure with significant
time delays in the negative loops
• Time delays in the negative loops
lead to the possibility that the state
of the system will overshoot and
oscillate around the carrying
capacity
• What are the examples of S-shaped
growth with overshoot?
S-shaped growth with
overshoot structure
Carrying Capacity

State of the
System

Time

Net +
Increase State of the
Rate R System
+
+
Delay

Fractional B -
Net Increase Resource Carrying
Rate Adequacy Capacity
+ Delay +
 Example of S-shaped growth
with overshoot
Population of London
10

0
1800 1850 1900 1950 2000
US Aluminum Production
5000

2500

0
1900 1920 1940 1960 1980 2000
 Overshoot and Collapse
• Carrying capacity is reduced by the
variables
• E.g. the ability of the environment to
support a growing population is
eroded or consumed by the
population itself
• If there is no regeneration of the
carrying capacity, the equilibrium
of the system is extinction
• What are the examples of overshoot
and collapse?
Overshoot and collapse
structure
Carrying Capacity

State of the
System
Time

+
+
Net Consumption/
State of the
Increase Erosion of
System
R
+ Rate Carrying Capacity
+

B - -
Fractional
Resource Carrying
Net Increase
Adequacy Capacity
Rate
+ +
 Example of overshoot and
collapse
New England Haddock Catch Net Change in World Nuclear Power Capacity
150 40

30
100

20

50
10

0 0
1880 1900 1920 1940 1960 1980 2000 1950 1960 1970 1980 1990 2000

Sales of the Atari Corporation Silver Prices

2.0 40

1.5 30

1.0 20

0.5 10

0.0 0
1976 1978 1980 1982 1984 1986 1975 1977 1979 1981 1983 1985
 What are the structures for
these exponential growth
behaviors?
US Real GDP US Prison Population
8000 1200
AverageGrowth
Rate3.45%/year AverageGrowthRate:
DoublingTime-20years 1926-1995:3.5%/year(doublingtime-20years)
Billion 1992 $/Year

Thousand People
1970-1995:6.8%/year(doublingtime-10years)
900

4000 600

300

0 0
1850 1900 1950 2000 1920 1940 1960 1980 2000

World Population Transistors per Chip, Intel Microprocessors

6 6
Average Growth Rate: Average Growth Rate:
1900 - 1950: 0.86%/year (doubling time - 80 years) 33%/year (doubling time: - 2 years)
1950 - 1997: 1.76%/year (doubling time - 40 years)
107 Pentium
Billion People

6
Transistors/Chip 6
Pro
4 10
Million

5
10
4
3 104 Pentium
3
2 10
2
102 486
0 Upper Bound 1965 1975 1985 1995
1900 2000
386 Best Fit Exponential
4004 8080 8086 80286
Lower Bound
0 0
0 400 800 1200 1600 2000 1965 1970 1975 1980 1985 1990 1995 2000
Basic positive feedbacks
responsible for economic
growth
 Expanding the model to
include investment and births
 Simple model of the
demographic transition
 First-cut model to explain
growth in prison population
 Prison population model
expanded to include
hypothesized social feedback
 Prison population model
expanded to include rewards
and risk of crime
Selected positive feedbacks
underlying Moore’s Law
 What are the structures
underlying these goal-seeking
1500
behaviors?
Semiconductor Fabrication Defect Rate
100
Nuclear Plant Load Factor
Start of TQM Program
80
1000
60

40
500

20

0 0
1987 1988 1989 1990 1991 1978 1980 1982 1984 1986 1988 1990 1992

Television Share of All Advertising, US US Traffic Fatalities per Vehicle Mile

25 25

20 20

15 15

10 10

5 5

0 0
1950 1958 1967 1975 1983 1992 1920 1940 1960 1980 2000
Process improvement efforts –
PDCA
Process improvement for
nuclear plant load
Feedbacks acting to improve
automobile safety
Demand and supply for TV
ads
TV ads model expands to
include the audience
annoyance loop
TV ads model expands to
include couch potato and
program quality
 What are the structures
underlying these oscillation
behaviors?0.4
US Real GDP Deviation From Trend

0.0

-0.4
1850 1900 1950 2000

US Unemployment Rate
Capacity Utilization, US Manufacturing 12
95
10
90
8
85
6

80
4

75 2

70 0
1945 1955 1965 1975 1985 1995 1945 1955 1965 1975 1985 1995
Negative feedbacks and delays
contributing to the business
cycle
 Next Week
• Chapter 6
• Research Proposal
• 1 paragraph summarize of Navid’s
paper