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Behavioral Rules and the Theory of the Firm

In: Readings in Industrial Economics

Author

Listed:
  • R. M. Cyert
  • M. I. Kamien

Abstract

The neoclassical theory of the firm as synthesized by Samuelson is an example of the use of deductive arguments to arrive at meaningful theorems in economics.1 Starting with only a few explicit assumptions, a number of interesting theorems and corollaries are derived. The theorems describe a set of optimal decision rules which a profit-maximizing firm should follow to determine its level of outputs and inputs given market price. Failure to follow these rules will not only diminish profit but will make it impossible for the firms to survive under the free entry market conditions assumed. If it does follow them, the firm has no problem of dealing with uncertainty because nothing is uncertain in the model posited.

Suggested Citation

  • R. M. Cyert & M. I. Kamien, 1972. "Behavioral Rules and the Theory of the Firm," Palgrave Macmillan Books, in: Charles K. Rowley (ed.), Readings in Industrial Economics, chapter 6, pages 91-102, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-15484-5_6
    DOI: 10.1007/978-1-349-15484-5_6
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