Extending the Cyert–March duopoly model: organizational and economic insights

Two studies were conducted to explore the organizational and economic insights provided by the duoploy model described in the 1963 book ‘A Behavioral Theory of the Firm’ by Cyert and March. Study 1 examined the extent to which two firms that differed solely in the decision behavior of a routine would also differ in organizational and economic measures and impacts. The dominant result demonstrated that organizations that did not perform well organizationally did not perform well economically. Study 2 examined the data from the first study to determine the extent to which the performance of the duopoly was consistent with a set of eight stylized economic facts drawn from the empirical literature on oligopoly. Study 2 demonstrated consistency with five of the eight stylized economic facts and provided partial support for two others. We conclude that behavioral constructs of the Cyert–March duopoly model provide behavior and performance capabilities that bridge the gap between game-theoretic models of duopoly and the computational and informational realities of organizations.