What a blast from the past. The old Model 3 correction for product similarity was initially devised by Richard Smallwood and was implemented in software code for Sawtooth Software by Rich Johnson sometime, I think, during the 1980s. Starting in the late 1990s, we no longer recommended its use (after seeing anomalies and problematic simulation situations); instead recommending Randomized First Choice (RFC). We dropped the old Model 3 correction many years ago from our software products. None of us remaining at the company know the algorithm, so we don't know the answers to your questions.
The best first step to reducing IIA problems and correcting for product similarity is to use individual-level utilities, such as from HB estimation.
We strongly recommend you take another market simulation approach such as RFC or simulating using either first choice or the logit equation on the HB beta draws. Depending on your sample size, your needs for individual-level precision, and the speed of your simulator, you can use 50 to 500 beta draws per respondent and do an excellent job.