Chaos in nonlinear dynamical systems exemplified by an R&D model

Nonlinear dynamical systems theory plays an increasing role in the mathematical analysis of economic problems. The main purpose of this paper is to present some basic concepts and results occurring in this context to the OR/MS community. After a brief review of a few papers on chaotic management systems, the authors present a time-discrete model which shows on the one hand the effects of a firm’s R&D-activity on their turnover, and on the other hand takes into consideration the important role of the management for the firm’s behaviour. The influence of the management is modeled by a dynamic nonlinear decision rule, which is well-known in behavioural decision theory. The counteracting effects of a firm’s evolution and the reactions of the management may lead to erratic behaviour.