Effects of Feedback Complexity on Dynamic Decision Making

Human perceptions in climate change

“…As already mentioned, the problem of human understanding and control of dynamic systems, such as the climate change, is widely known (Sweeney and Sterman 2000;Brehmer 1989Brehmer , 1992Diehl and Sterman 1995;Moxnes and Saysel 2004;Paich and Sterman 1993;Sterman 1989;Sterman and Sweeney 2002). But recently, evidence for an even more disturbing problem has been found: that people have trouble understanding even simple dynamic tasks consisting of one stock, one inflow and one outflow (Cronin and Gonzalez 2007;Cronin, et al in press).…”

“…Under these conditions, although all features of the climate change task are transparent and salient, yet people simply fail to account for time delays and dynamic complexity due to their limited mental models and cognitive incapacities and this leads to bullwhip like oscillation in the slow dynamic condition. Diehl and Sterman (1995) reported the effect of variation of dynamic complexity on human performance in a first order dynamic decision making task where the task was to minimize cost in the system by controlling stock in a bathtub to a desired level. In their task participants made production decisions where the sales (outflow) of the system were a function of both the production (i.e.…”

“…participant controlled inflow) and an exogenous noise. According to Diehl and Sterman (1995), there was a large deterioration of control performance with increase in feedback delay where participant's stock showed oscillations which were directly proportional to delay in the production decisions. The primary reason for the poor participant performance was attributed of the "Misperceptions of Feedback" (MOF) hypothesis (Sterman, 1989), where people took an "open loop" view of an actual closed loop system, failed to account for feedback delays between actions and responses, did not comprehend the system dynamics and ignored the non linearity present in the system.…”

“…The problem of human understanding and control of dynamic systems, such as the climate change, is widely known (Sweeney and Sterman 2000;Brehmer 1989Brehmer , 1992Diehl and Sterman 1995;Moxnes and Saysel 2004;Paich and Sterman 1993;Sterman 1989;Sterman and Sweeney 2002) but recently, even a more disturbing problem has been uncovered: that people have trouble understanding even a simple dynamic task consisting of one stock, one inflow and one outflow (Cronin and Gonzalez 2007;Cronin, Gonzalez, and Sterman in press). For example, Moxnes (1998aMoxnes ( , 1998bMoxnes ( , 2000Moxnes ( , 2004 in experiments concerning renewable resources using simple dynamic systems has shown that humans have strong tendencies to over utilize and over invest resources.…”

A Review of Behavioral Decision Making in the Newsvendor Problem

“…It does mean that the decision maker will place those order quantities that maximize his expected-profit. However, despite the fact that optimal order in a newsvendor problem can theoretically be calculated easily, there has been significant evidence from many controlled human experiments and surveys that the manager's inventory decisions do not always correspond to the optimal order quantity (Carlson and O'keefe 1969, Sterman 1989, Diehl and Sterman 1995, Fisherman and Raman 1996.…”