A Behavioral Analysis of Learning Curve Strategy

Model Name: A Behavioral Analysis of Learning Curve Strategy

Citation: A Behavioral Analysis of Learning Curve Strategy, John D. Sterman and Rebecca Henderson, Sloan School of Management, MIT and Eric D. Beinhocker and Lee I. Newman, McKinsey and Company.

Neoclassical models of strategic behavior have yielded many insights into competitive behavior, despite the fact that they often rely on a number of assumptions-including instantaneous market clearing and perfect foresight-that have been called into question by a broad range of research. Researchers generally argue that these assumptions are “good enough” to predict an industry’s probable equilibria, and that disequilibrium adjustments and bounded rationality have limited competitive implications.  Here we focus on the case of strategy in the presence of increasing returns to highlight how relaxing these two assumptions can lead to outcomes quite different from those predicted by standard neoclassical models. Prior research suggests that in the presence of increasing returns, tight appropriability and accommodating rivals, in some circumstances early entrants can achieve sustained competitive advantage by pursuing Get Big Fast (GBF) strategies: rapidly expanding capacity and cutting prices to gain market share advantage and exploit positive feedbacks faster than their rivals. Using a simulation of the duopoly case we show that when the industry moves slowly compared to capacity adjustment delays, boundedly rational firms find their way to the equilibria predicted by conventional models.  However, when market dynamics are rapid relative to capacity adjustment, forecasting errors lead to excess capacity, overwhelming the advantage conferred by increasing returns. Our results highlight the risks of ignoring the role of disequilibrium dynamics and bounded rationality in shaping competitive outcomes, and demonstrate how both can be incorporated into strategic analysis to form a dynamic, behavioral game theory amenable to rigorous analysis.

The original paper is on Archive.org ; it was eventually published in Management Science. You can get the MS version from John Sterman’s page here.

Source: Replicated by Tom Fiddaman

Units balance: Yes

Format: Vensim (the model uses subscripts, so it requires Pro, DSS, or Model Reader)

Behavioral Analysis of Learning Curve Strategy (Vensim .vmf)

New update:


The Energy Transition and the Economy

Model Name: The Energy Transition and the Economy: A System Dynamics Approach

Citation: John D. Sterman, 1981. PhD Dissertation, MIT Sloan School of Management

Source: Replicated by Miguel Vukelic (a heroic effort)

Units balance: Yes

Format: Vensim (Contains data variables and thus requires an advanced version or the free Model Reader)

The Energy Transition and the Economy (Vensim .vpm)

Terrorism Dynamics

Contributed by Bruce Skarin


This model is the product of my Major Qualifying Project (MQP) for my Bachelors degree in the field of system dynamics at Worcester Polytechnic Institute. There were two goals to this project:

1) To develop a model that reasonably simulates the historic attacks by the al-Qaida terrorist network against the United States.

2) To evaluate the usefulness of the model for developing public understanding of the terrorism problem.

The full model and report are available on my website.

Reference Mode

The reference mode for this model was the escalation of attacks linked to al-Qaida against the U.S., as shown below. The data for this chart is available through this Google Document.

Causal View of the Model

Below is the causal diagram of the primary feedback loops in the model.


Online Story Model

There is an online story version that explains the primary model structure as well as complete iThink and Vensim models on my MQP page.

Payments for Environmental Services

Model Name: payments, penalties, and environmental ethic

Citation: Dudley, R. 2007. Payments, penalties, payouts, and environmental ethics: a system dynamics examination Sustainability: Science, Practice, & Policy 3(2):24-35. http://ejournal.nbii.org/archives/vol3iss2/0706-013.dudley.html.

Source: Richard G. Dudley

Copyright: Richard G. Dudley (2007)

License: Gnu GPL

Peer reviewed: Yes (probably when submitted for publication?)

Units balance: Yes

Format: Vensim

Target audience: People interested in the concept of payments for environmental services as a means of improving land use and conservation of natural resources.

Questions answered: How might land users’ environmental ethic be influenced by, and influence, payments for environmental services.

Software: Vensim

Payments for Environmental Services (Vensim .vmf)

Models in the Special Issue of the System Dynamics Review on Environmental and Resource Systems

Submitted by Richard Dudley:

Models in the Special Issue of the System Dynamics Review on Environmental and Resource Systems, Andrew Ford & Robert Cavana, Editors. System Dynamics Review, Volume 20, Number 2, Summer of 2004.

  • Modeling the Effects of a Log Export Ban in Indonesia by Richard G. Dudley
  • The Dynamics of Water Scarcity in Irrigated Landscapes: Mazarron and Aguilas in South-eastern Spain by Julia Martinez Fernandez & Angel Esteve Selma
  • Misperceptions of Basic Dynamics: The Case of Renewable Resource Management by Erling Moxnes
  • Models for Management of Wildlife Populations: Lessons from Spectacle Bears in Zoos and Gizzly Bears in Yellowstone by Lisa Faust, Rosemary Jackson, Andrew Ford, Joanne Earnhardt and Steven Thompson
  • Modeling a Blue-Green Algae Bloom by Steven Arquitt & Ron Johnstone

See the following web site for article summaries and downloadable models described in this special issue:  http://www.wsu.edu/~forda/SIOpen.html