Abstract for: Modelling Production Capacity Ramp-Downs: “Reverting” the Market Growth Model

In Forrester’s 1968 ‘Market Growth’ model and its extensions, capacity adjustments, both expansion and contraction, are driven by the firm’s delivery delay. However, firms often rely on different information when making these opposite decisions. This paper investigates whether separating the information triggers for expansion and contraction stabilizes capacity dynamics or amplifies oscillations in the Market Growth model under different market size scenarios. The System Dynamics Market Growth Model version of Sterman is extended to represent capacity expansion triggered by delivery delay and capacity reduction triggered by capacity utilization. The extended model is first compared with the original formulation under the unlimited market setting. Subsequently, simulations are conducted across four market scenarios: Unlimited, Limited, One-Time Reduction, and Continuously Decreasing markets. Results show that separating the information triggers slightly stabilizes the capacity dynamics in the original settings. Compared with the original model, the extended model dampens oscillations in Capacity, Delivery Delay, and Capacity Utilization, reflecting a more stable system response. However, in constrained markets, the structure can lead to persistent capacity underutilization and delayed ramp-downs, particularly in scenarios with declining market potential. These findings contribute to the system dynamics literature by providing an analysis of ramp-down policies within the classical Market Growth model, addressing a topic that is mainly not discussed in the extant literature. The results suggest that conservative adjustment rules and delays can lead firms to tolerate excess capacity for extended periods, highlighting the importance of better understanding managerial decision rules for capacity reduction. Grammar correction and language polishing.