18th MIT-UAlbany-WPI System Dynamics Ph.D. Colloquium
Friday, March 27th, 2009
Sloan School of Management - MIT
Room: E51-395

Organizers: Kawika Pierson (MIT) and Andy Whitmore (UAlbany)

Time

Presentation

Speaker

10:00

Clean Technology Startup Management Flight Simulator

Joe Hsueh, MIT

10:50

Path Dependency and the Role of Delays in Creating Shared Understanding in Dyadic Communication: Lessons from a Simulation Model

Navid Ghaffarzadegan , University at Albany

11:40

Diffusion models and market externalities: the case of wind power

Katherine Dykes, MIT

12:30

Lunch

 

1:30

Full Information Product Pricing (FIPP):  Information Policies to Expand the Share of Worker and Environment Friendly Trade in the NAFTA Region

Andy Whitmore, University at Albany

2:20

The Dynamics of the Product Development Pipeline

Paulo Figueiredo, Boston University

3:10

Reducing income volatility through better resource sharing policies: The case of the investment banking industry

Marcel Dick, Frankfurt School of Finance & Management

4:00

Closing Remarks, Informal Gathering

 

Abstracts
Clean Technology Startup Management Flight Simulator
Joe Hsueh (presenter), David Miller, John Sterman

How to run a successful clean technology startup company? What are the strategies that enable a startup to escape the “death of valley” and emerge as a winner in the market? To gain some insights in this, we are developing a Clean Technology Startup Management Flight Simulator, a system dynamics based computer simulation game to study the dynamics of clean tech startups. The model builds on the previous work by Miller (2007) and Oliva, Sterman and Giese (2003). It includes the prospect chain, product development, sales, marketing, human resource, along with financing and accounting. We hope to use it as a teaching tool for learning various tradeoffs a clean tech startup faces in a cash constraint environment. In this presentation, we will present a beta version for your feedback.

Path Dependency and the Role of Delays in Creating Shared Understanding in Dyadic Communication: Lessons from a Simulation Model
Navid Ghaffarzadegan (presenter), Laura Black, Don Greer, David Andersen

Recently, Laura Black, Don Greer, David Andersen and I conducted a study on dynamics of shared understanding in dyadic communication, and in this presentation I will discuss some of our findings. Informed by a theory of symbolic interactionism, this research explores the dynamics of dyadic communications within which understanding is socially constructed. Based upon an earlier analysis of a case-study investigation in a large multi-disciplinary governmental project with multiple contractors and subcontractors, we modify, simulate, and analyze a dynamic model of dyadic communications. Our simulation results support the previous findings and, in addition, underscore the role of path dependency in creating shared understanding; that is, “first” interpretations affected by random and imprecise messages can influence subsequent shared understanding and meaning construction significantly. Finally, our sensitivity analysis sheds light on the effects of decision and action delay and observation and orientation delay. Delays, which in part represent how responsive a partner is, can have counter-intuitive effects on players’ convergence or divergence in a dyadic communication. Our study shows that reducing observation and orientation delay can be considered as a leverage point for communication convergence, while increasing decision and action delay may facilitate convergence.  

Diffusion models and market externalities: the case of wind power
Katherine Dykes

Within the domestic and global wind industry, there has been a lot of apprehension regarding the uncertain fate of the federal Production Tax Credits (PTCs) for wind and other renewable electricity generation technologies.  It is commonly recognized that the absence of such federal policy supports have had severe negative impacts on the industry.  First in the 1980’s, then again in the 1999, 2001, and 2003, the PTC expiration left US wind industry growth stagnant.  At first look, one might wonder why the US policy-makers just can’t seem to get it right.  On the other hand, this start-stop, “on-off” switch federal policy approach seems endemic of the wind industry regardless of the host country.  This presentation looks at policy support for the wind industry.  In addition, attempts are made to understand the various rationales for the national policy support mechanisms in each country and the “stop-start” phenomenon in particular.  Using a system dynamics approach, a methodology unique in its extensive appreciation of feedback effects in complex systems, a model of the historical wind industry is developed.  The behavior of the model is empirically validated using the different countries in the case study, namely the US, Germany and Denmark, as reference points.  The effect of different policies on dynamic market behavior is then simulated and analyzed.  In conclusion, the paper explores important policy levers with respect to wind industry development and what alternative policy-structures may lead to more sustainable growth of the wind industry.


Full Information Product Pricing (FIPP):  Information Policies to Expand the Share of Worker and Environment Friendly Trade in the NAFTA Region
Andy Whitmore

This work focuses on the creation of a simulation model of one agricultural product—coffee grown in Mexico but roasted, brewed, and consumed in Canada and the United States—that realistically represents the embedded agricultural and economic systems and captures the dynamic interactions of this natural resource economy. The simulation model will be linked to a judgment task which will be performed to elicit user preference functions. The cues present in the judgment task scenarios will be elicited from a focus group session aimed at determining what pieces of product information are most useful to stakeholders in their market and policy choices. The objective functions emerging from the judgment task will be input into the simulation model where a set of optimal policies will be determined for each stakeholder through the maximization of the function. The purpose of this work is to create a means through which policy makers and consumers can identify an optimal set of policy options to guide their policy or purchasing decisions and to illustrate the importance of non-price product information in these choices. This research is part of a larger project undertaken by the North American Digital Government Working Group which is supported by the National Science Foundation, the National Council for Science and Technology (CONACYT, Mexico) as well as by institutions in Canada, Mexico, and the United States. The purpose of this broader research project is to explore a set of government-sponsored product labeling and information policies that may have the potential to significantly expand the share of fair wage and environmentally friendly products traded within the NAFTA region and thereby promote agricultural and economic sustainability.

The Dynamics of the Product Development Pipeline
Paulo Figueiredo

Management of NPD pipeline involves steering several promising projects through a sequence of screens. We explore the effects of relevant decisions in a 3-stage pipeline by varying screen thresholds, complexity of projects and managerial biases while adjusting capacity utilization. Our analysis establishes convex relationships between portfolio value at the end of pipeline and global resource allocation and complexity variables, indicating a limit for front loading practices owing to congestion effects.

Reducing income volatility through better resource sharing policies: The case of the investment banking industry
Marcel Dick

Cyclical income is a phenomenon which nearly every industry has to cope with. Those oscillations are driven by exogenous and endogenous factors outside and inside the decision makers’ sphere of influence. According to the contingency theory, a reaction on environmental change for fitting best to contingencies of the situation is the reallocation of internal resources. Therefore, this research project aims to examine the effect of competition on internal resources on income volatility of multi-product companies. The project is based on the hypothesis that income volatility is influenced by endogenous resource sharing policies. Firstly, the operating income of different industries is analyzed. As a result the banking industry shows relative low income volatility. Within this set, the investment banking industry takes an exceptional position with remarkable higher oscillations. Second, for a deeper understanding of this phenomenon, the specific characteristics of investment banks are analyzed guided by the service production theory. In a next step, by using the two-shower model of Morecroft et al. the situation of competition on internal resources is investigated. Hence, the two-shower model is tested and analyzed in symmetric and asymmetric situations. Discussing the opportunities and limits of a translation into a company/ investment banking context a stylized model is derived. After showing the preservation of illustrated dynamic behaviour from the shower model, the contrary behaviour of minimizing the gap of desired income and maximizing total cumulated income is released. The equilibrium model is turned into a growth model by implementing an average growth rate for the desired income. The results show a higher potential for oscillations in the growth model and thus an increase in complexity for decision makers to allocate internal resources in the most effective way. Correspondently, the case of an international investment bank is investigated. In this last step, a product class is identified and the real internal production data divided by primary and secondary business units is analyzed. The data shows first indications of a competition on shared sales teams. In this context the next step will be the implementation of the specific resource logic in the model and a simulation of the income development of the different business units.

 

Last edited by NG on 6/5/09