A THEORY ON THE BEHAVIOR OF THE COMPANY
A Behavioral Theory of the Firm
Richard M. Cyert and James G. March
The authors make a series of reflections on how firms make decisions, which is a basis for developing a theory of decision making in the company, supplementing the study of market factors with the review of operations internal company (structure, setting objectives, expectations formation, and implementation of decisions).
The authors' research is based on 4 commitments:
Focus on a few decisions (eg, price and production)
develop business models based on their processes
Link to the extent possible business models with empirical observations Develop
a general theory, beyond the companies studied
BACKGROUND
BEHAVIORAL THEORY OF THE COMPANY
current consensus on the theory of the firm. There are three disagreements on the theory of the firm: on what that theory, how far is poor, and what are the appropriate methods for improvement. But many economists would agree that:
Assuming that the company operates in a perfectly competitive market, the generally accepted theory states that the objective of maximizing the company's net income compared at given prices and given a production function technologically. This maximization is met by determining the "mix" optimal product and factor, which is the equilibrium position.
This theory has been extended to include imperfect factor markets, or imperfect product markets, in relation to the theory of monopolistic competition and oligopoly theory.
This basic theory is considered poor. First, because the motivational and cognitive assumptions seem unrealistic:
Profit maximization is a goal or others, or is not a goal (motivational hypothesis)
The cognitive hypothesis, the classical assumption of certainty and its modern counterpart (the knowledge of the probability distribution of future events) has been questioned.
Second, this theory has little to do with today's enterprise: not talking about a complex organization, or control, or standard operating procedures, or budgets, or middle managers. Challenges to the proposal
motivational profit maximization. First, we must ask: What is the benefit for the sole purpose of business? Employers have other personal goals. Moreover, according to Papandreou, the objectives of the organization emerge from the interaction among participants, resulting in a "general preference function." As an alternative to this approach is approach of the "summum bonus." For example, Rothschild's first entrepreneur is the engine of long-term survival, or to Baumol, for which the company tries to make maximum sales, linked to a restriction of the benefit.
Second, no one questions the importance of the benefit, but the hypothesis of maximization. Gordon, Simon and Margoli propose changing satisfactory benefit, not maximum, which may change over time.
cognitive challenges to the proposal of perfect knowledge. It is not appropriate to perfect knowledge in the theory of the firm, and introducing expected value calculations for risks solves only part of the problem. Simon and others say that information is not there to get it, that the alternatives are presented sequentially, and in order to investigate the environment determines the decisions taken.
Challenges to the conventional concept of business. It has been much speculation about the importance of size in large organizations. Marshall talks about the impact of size on cost reduction and performance of the organization, regardless of organizational aspects. There are some issues that present difficulties, has been criticized
not consider the company as an organization. Papandreou sees it as a cooperative, whose executive tasks are accomplished by a "coordinator at the apex" to achieve organizational purposes rationally allocating resources. This is a substantive planning (budget) planning procedures (the system of communication and authority) and the implementation of both plans.
has criticized the way it represents the process of decision making shows that businesses are not marginal revenue equals marginal cost when deciding on production or price, but that still other "rules of thumb." For example, in USA and Britain, the price is based on the total costs and inventory turnover is what determines the level of production.
Gordon argues that there are substantial differences between the processes making business decisions, and decision-making processes in the theory of the firm with these comments:
theory should reflect how costs are used in the company's reality
The treatment of uncertainty is considerably different from that used in practice
There is a discrepancy between the theoretical time critical and real time
The executive of the company only deals with a subset of decision variables which are specified in the theory.
In defense of orthodoxy. Proponents of the theory they defend. The most prominent is Milton Friedman, who said that the role of economic theory is to formulate proposals with which to analyze the world and not playing it.
A second area of \u200b\u200bdefense has two lines. The first argues, as does Machlup, the costs and revenues are subjective, that is perceived by those who have to explain their decisions. A second is to demonstrate empirically the assumptions of the theory are valid. For example, Earley said that modern accounting techniques, such as the "direct costing" allow managers to behave as indicated by the theory of the firm. The third method
general defense of the conventional theory can be called ...
BEHAVIORAL THEORY OF THE COMPANY
current consensus on the theory of the firm. There are three disagreements on the theory of the firm: on what that theory, how far is poor, and what are the appropriate methods for improvement. But many economists would agree that:
Assuming that the company operates in a perfectly competitive market, the generally accepted theory states that the objective of maximizing the company's net income compared at given prices and given a production function technologically. This maximization is met by determining the "mix" optimal product and factor, which is the equilibrium position.
This theory has been extended to include imperfect factor markets, or imperfect product markets, in relation to the theory of monopolistic competition and oligopoly theory.
This basic theory is considered poor. First, because the motivational and cognitive assumptions seem unrealistic:
Profit maximization is a goal or others, or is not a goal (motivational hypothesis)
The cognitive hypothesis, the classical assumption of certainty and its modern counterpart (the knowledge of the probability distribution of future events) has been questioned.
Second, this theory has little to do with today's enterprise: not talking about a complex organization, or control, or standard operating procedures, or budgets, or middle managers. Challenges to the proposal
motivational profit maximization. First, we must ask: What is the benefit for the sole purpose of business? Employers have other personal goals. Moreover, according to Papandreou, the objectives of the organization emerge from the interaction among participants, resulting in a "general preference function." As an alternative to this approach is approach of the "summum bonus." For example, Rothschild's first entrepreneur is the engine of long-term survival, or to Baumol, for which the company tries to make maximum sales, linked to a restriction of the benefit.
Second, no one questions the importance of the benefit, but the hypothesis of maximization. Gordon, Simon and Margoli propose changing satisfactory benefit, not maximum, which may change over time.
cognitive challenges to the proposal of perfect knowledge. It is not appropriate to perfect knowledge in the theory of the firm, and introducing expected value calculations for risks solves only part of the problem. Simon and others say that information is not there to get it, that the alternatives are presented sequentially, and in order to investigate the environment determines the decisions taken.
Challenges to the conventional concept of business. It has been much speculation about the importance of size in large organizations. Marshall talks about the impact of size on cost reduction and performance of the organization, regardless of organizational aspects. There are some issues that present difficulties, has been criticized
not consider the company as an organization. Papandreou sees it as a cooperative, whose executive tasks are accomplished by a "coordinator at the apex" to achieve organizational purposes rationally allocating resources. This is a substantive planning (budget) planning procedures (the system of communication and authority) and the implementation of both plans.
has criticized the way it represents the process of decision making shows that businesses are not marginal revenue equals marginal cost when deciding on production or price, but that still other "rules of thumb." For example, in USA and Britain, the price is based on the total costs and inventory turnover is what determines the level of production.
Gordon argues that there are substantial differences between the processes making business decisions, and decision-making processes in the theory of the firm with these comments:
theory should reflect how costs are used in the company's reality
The treatment of uncertainty is considerably different from that used in practice
There is a discrepancy between the theoretical time critical and real time
The executive of the company only deals with a subset of decision variables which are specified in the theory.
In defense of orthodoxy. Proponents of the theory they defend. The most prominent is Milton Friedman, who said that the role of economic theory is to formulate proposals with which to analyze the world and not playing it.
A second area of \u200b\u200bdefense has two lines. The first argues, as does Machlup, the costs and revenues are subjective, that is perceived by those who have to explain their decisions. A second is to demonstrate empirically the assumptions of the theory are valid. For example, Earley said that modern accounting techniques, such as the "direct costing" allow managers to behave as indicated by the theory of the firm. The third method
general defense of the conventional theory can be called ...
Peter Drucker 
