Simulating stable, trending and turbulent operating environments

An interesting area of study in management concerns the behavior and performance of enterprises under different operating conditions. Unfortunately it can be difficult to gather real world data to test the many theories in this area. Therefore we have developed an agent-based simulation that lets us experiment within an artificial market environment. Modeling the performance of organizations relies on two key factors; the strategies that organizations employ and the dynamic nature of consumer demand in the environment. Our model focuses on two types of agents, enterprise agents and consumer agents. Enterprise agents operate under a range of well-studied management strategies that are defined by the Miles and Snow typology. Regardless of their strategy, enterprises have the goal of supplying the most desirable products to consumers in the market place. By comparison with our enterprise agents, our consumer agents are simple and merely seek to have their product demands met. In this paper we focus on describing and analyzing how we simulate three different types of market conditions. Although the dynamic behavior of our consumer agents is quite simple they can be configured in the simulation to give rise to stable, trending or turbulent environments. In a stable environment, consumers exhibit only minor variations in their demand for products. In trending environments consumers develop a preference for a particular product. By contrast, in a turbulent market consumers exhibit large fluctuations in their demand. In this study we describe the key elements of our agent-based model and report the results of experiments that test the three simulated environments.