Posted by John Sterman <
jsterman@MIT.EDU>
Martin Schaffernicht asks about the relationship between experimental economics and system dynamics.
Experimental studies of dynamic systems are growing. Studies in SD
and related fields cover both the ""theory building and testing"" and ""concrete problems"" purposes Martin describes.
The MIT SD group has been doing experimental studies of dynamic decision making since the mid 1980s. Some studies include:
Sterman, J. and L. Booth Sweeney (2007). ""Understanding Public Complacency About Climate Change: Adults' Mental Models of Climate Change Violate Conservation of Matter."" Climatic Change 80(3-4): 213-238.
Sterman, J. D. and L. Booth Sweeney (2002). ""Cloudy Skies:
Assessing Public Understanding of Global Warming."" System Dynamics
Review 18(2): 207-240.
Booth Sweeney, L. and J. D. Sterman (2000). ""Bathtub Dynamics:
Initial Results of a Systems Thinking Inventory."" System Dynamics Review 16(4): 249-294.
Croson, R., K. Donohue, E. Katon, J. Sterman (working paper). Order Stability in Supply Chains: The Impact of Coordination Stock. MIT Sloan School of Management Working Paper No. 4513-04.
Diehl, E. and J. Sterman (1995). ""Effects of Feedback Complexity on Dynamic Decision Making."" Organizational Behavior and Human Decision Processes 62(2): 198-215.
Kampmann, C. and J. Sterman (1998). Do Markets Mitigate Misperceptions of Feedback in Dynamic Tasks? Cambridge, MA 02139, Sloan School of Management, MIT.
Paich, M. and J. Sterman (1993). ""Boom, Bust, and Failures to Learn in Experimental Markets."" Management Science 39(12): 1439-1458.
Sterman, J. (1987). ""Testing Behavioral Simulation Models by Direct Experiment."" Management Science 33(12): 1572-1592.
Sterman, J. (1989). ""Misperceptions of Feedback in Dynamic Decision Making."" Organizational Behavior and Human Decision Processes 43(3):
301-335.
Sterman, J. (1989). Misperceptions of Feedback in Dynamic Decision Making. Computer Based Management of Complex Systems. P. Milling and E. Zahn. Berlin, Springer Verlag: 21-31.
Sterman, J. (1989). ""Modeling Managerial Behavior: Misperceptions of Feedback in a Dynamic Decision Making Experiment."" Management Science
35(3): 321-339.
See also the PhD theses of Bent Bakken, Christian Kampmann, Ernst Diehl, Mark Paich, Linda Booth Sweeney (all MIT except Linda's, which is Harvard).
See also the experimental studies of Erling Moxnes (Univ. of Bergen) on the dynamics of renewable resource management (for which Erling won the Forrester Award, for Erling Moxnes (1998) Not Only the Tragedy of the Commons: Misperceptions of Bioeconomics: Management Science. 44: (9) 1234-1248.).
Tarek Abdel-Hamid (Naval Postgraduate School) and colleagues carried out a number of experiments in which people manage simulated software development projects under different information and feedback conditions.
Jim Ritchie-Dunham's PhD thesis reports experiments investigating the impact of different modeling and information display tools such as balanced scorecards on simulated organizational performance.
Shayne Gary (AGSM) is active in experiments studying misperceptions of feedback in various simple dynamic systems.
There is also a robust literature of experimental studies of the beer game (see references in the Croson, Donohue, Katok and Sterman working paper, available on
http://web.mit.edu/jsterman/www), and a growing literature in what is now called ""behavioral operations management"". Many BOM studies are experiments with dynamic systems such as supply chains, newsvendor settings, sequential choice, and resource allocation. There have been several conferences, with another coming up this July at the U. of Minnesota (hosted by Karen Donohue). See also
http://www.ombehavior.com/ and a forthcoming special issue of MSOM on behavioral operations.
In the broader field of judgment and decision making, experimental studies of dynamic decision making have been an important thread of work for decades. See work of A. Rapaport, W. Edwards, J. Busemeyer, D. Kleinmuntz, R. Hogarth, B. Brehmer, D Dörner, J. Funke, C. Plott, V. Smith, C Camerer, A. Wearing and many others. A google search for ""dynamic decision making"" will yield many useful sites and references; the papers above also include lit review. And experimental studies in behavioral economics, behavioral finance, and game theory increasingly utilize dynamic tasks. I am sure this abbreviated list omits many interesting and important works -- my apologies in advance.
It is important to distinguish between tasks that are""static"",
""repeated"" and ""dynamic"": Static tasks are ""one-shot"": you are presented with information and asked to make a judgment or decision, receiving no feedback or opportunities for subsequent decisions. An example is the one-shot prisoner's dilemma: you choose once between cooperation and defection. The iterated prisoner's dilemma is a ""repeated"" task. You receive outcome feedback as you play multiple rounds, and have the chance to learn about the behavior of others and update your strategies. But there is no ""action feedback"" -- that is, there is no feedback (in the classic IPD paradigm) between your decisions and future payoffs. A true dynamic decision task includes such action feedbacks: as in most real-world tasks, your decisions alter the state of the system (potentially including payoffs, probabilities, and available choices), which then condition your future decisions. The beer game is an example: your ordering decisions alter the inventories and backlogs in the system -- both yours and those of other players -- which then condition future ordering decisions. You receive outcome feedback each period but the situation you face is also different each period as the decisions you and others take alter the state of the system. The research shows that as the dynamic complexity of the system grows (as there are more time delays, feedbacks (especially positive feedbacks), accumulations (stock and flow structures) and nonlinearities, the worse human
performance typically is, and the slower the rate of learning.
Similarly, Dennis Meadows' Fishbanks game is a dynamic task: you not only receive outcome feedback on the investment and fishing effort choices of others, but your actions and those of others alter the stock of fish available in the future and hence the payoffs to future investment and fishing effort.
John Sterman
Posted by John Sterman <
jsterman@MIT.EDU> posting date Thu, 31 May 2007 09:35:42 -0400 _______________________________________________