Strategic Modelling and Business Dynamics: A Feedback Systems Approach

10.6. Equation Formulation Tests and the Soap Industry Model

Equation formulation tests build further confidence in the model by demonstrating that equations and numerical parameters in the model are consistent with available facts and data from the mental, written and numerical databases.

There are three common tests, mentioned earlier, and for convenience repeated here:

• Dimensional consistency – Are all equations dimensionally correct without the use of parameters that have no real-world counterpart?

• Parameter verification – Are parameters consistent with descriptive and numerical knowledge?

• Extreme conditions – Does each equation make sense even when its inputs take on extreme values?

To illustrate the tests, we review a selection of equation formulations describing consumer behaviour which are taken from the market sector of the soap industry model.

10.6.1. Substitution of Bar Soap by Shower Gel

The substitution rate of bar soap by shower gel is expressed as the product of Traditional English Bar Soap volume and the fractional rate of substitution, as shown in Figure 10.11. The equation is a standard stock depletion formulation algebraically similar to the workforce departure rate in Chapter 5's simple factory model and to independents' capacity loss in the oil producers' model. Identical formulations apply to the substitution rates of Moisturising Bar Soap and Me Too Bar Soap. The fractional rate of substitution is defined as a fixed proportion, 0.005 per month, of bar soap ...