System Dynamics and Theory of Chaos in Freight Rate Forming in Shipping
AbstractThis paper deals with the application of System dynamics and Chaos theory in shipping using the example of freight rate forming. The development of new technologies, changes in structure and conditions, information accessibility, etc. are only some of the factors that intensify changes in freight rate forming in shipping. Therefore, shipping environment is becoming increasingly complex and dynamic. System dynamics seems to be a tool very suited for modelling of strategic and operational behaviour in shipping business. Due to the complex behaviour of these systems, chaos theory can also help in modelling of processes in shipping. The basic feature of chaotic systems is fine sensitivity in conditions at the beginning, when small change in input value may cause great changes in output values. By applying its concepts to the business process, as well as in freight rate forming in shipping, it prepares the business systems for quick response to the changes in the environment. KEY WORDS: chaos theory, shipping, freight rate, system dynamics
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