Graham, Alan K., "Parameter Formulation and Estimation in System Dynamics Model", 1976
ua435
The purpose of this paper is to convey the techniques and considerations normally involved in formulating and estimating parameters in system dynamics models. Ideally, model equations should be formulated so that the associated parameters each describe some unique observable characteristic of the real system. Thereby, translating observations and measurements below the level of aggregation of model structure (estimation from disaggregate data) into specific parameter values becomes very straightforward. Fewer assumptions about the structure of the system are needed than if the parameters were set by equation estimation or model estimation from data at the level of aggregation of model structure. Making additional assumptions provides more opportunities for systematic errors to creep into the parameter-setting process. Rather than using data at or above the level of aggregation of model structure to set parameters, such information might better be reserved for validity testing. When such data are not already used to set parameter values, the validity tests become simpler and depend upon fewer assumptions.Parameters need only be set accurately enough to allow the model to fulfill its purpose. One time-saving research strategy is to determine, by using only roughly-set parameters at first, how accurately the parameters must be set before investing time and effort in setting them accurately. Then, sensitivity testing can identify the relatively small number of parameters whose values significantly alter the model behavior or response to policy changes. The model can then be reformulated, the policies redesigned, or the sensitive parameters reset by more elaborate and hopefully more accurate techniques.
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