Integration of Behavioral and Operational Elements Through System Dynamics

In this chapter, we show how the tools and principles of system dynamics facilitate the integration of operations management and behavioral sciences. At its core, system dynamics develops process-based theories that explicitly examine the interactions between the physical and institutional structures of operational systems and the behavioral decision rules of the agents in those systems. We first describe the system dynamics perspective on decision-making in dynamic environments. We then present a set of guiding principles to formulate behavioral decision making and describe the methods used by system dynamists to gather data to formulate those decision rules. We used two detailed formulation examples from operational contexts to show how the formal representation of the decision-making process was used to gain operational insights through simulation and formal analytical techniques. The chapter concludes exploring potential areas of future research in behavioral operations leveraging the strengths of system dynamics.