Abstract:

This paper focuses on using system dynamics to describe and analyze the problem of a payday loan trap. Its aim is to describe the system by constructing a casual loop diagram and a stock and flow diagram for the given example and by running simulations with varying input parameters. The findings support the theory that there is a limited time available to act in an “addiction” system archetype before the fundamental solution becomes ineffective. Furthermore, the paper discusses the implications of the simulation results for the business world.