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This setting allows you to choose between using the 4-term deflection equation from O86 11.7.1.2 and the non-linear 3-term equivalent that is published in the US Special Design Provisions for Wind and Seismic (SDPWS), Eqn. 4.2-1.
The 3-term equation is a linearization of the 4-term equation, arrived at by combining the shear and nail slip equations in the 4-term equation using an "apparent" shear stiffness Ga. The linearization is achieved by setting the non-linear occurrences of shear force v in the 4-term equation to the shear capacity of the shear wall to render this value constant. It is therefore identical to the 4-term equation when the shear wall is at capacity, conservative when below capacity, and non-conservative for shear walls that are overstressed for design anyway. SDPWS Figure C4.3.2 shows this in graphical form.
The three-term equation was originally implemented in Shearwalls because it is the primary method in the SDPWS, which also shows the 4-term equation in an appendix. However, the process of equalizing deflections on the shear-resisting elements by adjusting the forces apportioned to each element converges more rapidly for the linear 3-term equation than the non-linear 4-term equation, so this option has been made available for Canadian user.
Note that sometimes neither equation converges because the solution lies in the discontinuity created at the point that the dead load force at a hold-down location equals the overturning force, and there is a jump in deflection due to the constant component of hold-down displacement from shrinkage, tolerance, and gaps. In this case, the program oscillates between two states that do not equalize deflections. The choice of 3-term vs. 4-term equation will not necessarily rectify this. We are working on a solution to this condition for a service release in the near future.