The Design of a Business Simulation Using a System-Dynamics-Based Approach

Abstract

Research on business simulation design has been mostly on a sub-system level. Yet, the business environment is complex by nature, characterized by interconnected organizational elements with nonlinear feedback loops, and requires a systems approach to be modeled effectively. In this paper a system-dynamics based interactive model of a business enterprise simulation is developed, consisting of 18 equations. The model draws heavily upon the economic theory of the firm and the expansive body of prior research on the design of business simulations. The focus is on the linkages between the production, cost, revenues, profits and stock market value of the firm. A working model of the recommended system is tested and its empirical properties discussed.