Increasing Simulation Realism Through the Modeling of Step Costs Cost Behavior in Business Simulations

Abstract

This paper addresses some of the theoretical problems involved in the modeling of fixed costs in business simulations. The theoretical nature of fixed costs as a special case of step costs is clarified. In addition, a mathematical technique is presented for the effective modeling of step costs within a computerized simulation model. Also, some of the consequences of significant amounts of step costs are illustrated.