alternative theories of the firm
TRANSCRIPT
![Page 1: Alternative Theories of the Firm](https://reader037.vdocuments.us/reader037/viewer/2022102923/5528b93355034666588b48e7/html5/thumbnails/1.jpg)
Alternative Theories
of the Firm
![Page 2: Alternative Theories of the Firm](https://reader037.vdocuments.us/reader037/viewer/2022102923/5528b93355034666588b48e7/html5/thumbnails/2.jpg)
Problems with Traditional TheoryProblems with Traditional Theory
Difficulties in maximising profit non-use of opportunity cost difficulties in identifying demand & MR difficulties in deciding the time period for
maximising profit
Alternative aims separation of ownership and control the principal–agent problem managerial utility maximisation profit satisficing
![Page 3: Alternative Theories of the Firm](https://reader037.vdocuments.us/reader037/viewer/2022102923/5528b93355034666588b48e7/html5/thumbnails/3.jpg)
Alternative Maximising TheoriesAlternative Maximising Theories
Long-run profit maximisation implications for investment and short-run
pricing and output difficulties in testing the theory
Managerial utility maximisation factors determining managers’ utility
salarysecuritydominanceprofessional excellence
implications for firms’ behaviour importance of economic environment
![Page 4: Alternative Theories of the Firm](https://reader037.vdocuments.us/reader037/viewer/2022102923/5528b93355034666588b48e7/html5/thumbnails/4.jpg)
Alternative Maximising TheoriesAlternative Maximising Theories
Sales revenue maximisation (short run) equilibrium output and price
![Page 5: Alternative Theories of the Firm](https://reader037.vdocuments.us/reader037/viewer/2022102923/5528b93355034666588b48e7/html5/thumbnails/5.jpg)
Sales revenue maximising outputSales revenue maximising output£
QO
TR
![Page 6: Alternative Theories of the Firm](https://reader037.vdocuments.us/reader037/viewer/2022102923/5528b93355034666588b48e7/html5/thumbnails/6.jpg)
£
QO
TR
Q1
Sales revenue maximising outputSales revenue maximising output
![Page 7: Alternative Theories of the Firm](https://reader037.vdocuments.us/reader037/viewer/2022102923/5528b93355034666588b48e7/html5/thumbnails/7.jpg)
£
QO
TC
TR
Q1
Sales revenue maximising outputSales revenue maximising output
![Page 8: Alternative Theories of the Firm](https://reader037.vdocuments.us/reader037/viewer/2022102923/5528b93355034666588b48e7/html5/thumbnails/8.jpg)
£
QO
TC
TR
Q2 Q1
Sales revenue maximising outputSales revenue maximising output
![Page 9: Alternative Theories of the Firm](https://reader037.vdocuments.us/reader037/viewer/2022102923/5528b93355034666588b48e7/html5/thumbnails/9.jpg)
Alternative Maximising TheoriesAlternative Maximising Theories
Sales revenue maximisation (short run) equilibrium output and price
effect of a minimum profit constraint
![Page 10: Alternative Theories of the Firm](https://reader037.vdocuments.us/reader037/viewer/2022102923/5528b93355034666588b48e7/html5/thumbnails/10.jpg)
£
QO
TC
TR
Q2 Q1Q3
Total profit
Sales revenue maximising with a profit constraintSales revenue maximising with a profit constraint
![Page 11: Alternative Theories of the Firm](https://reader037.vdocuments.us/reader037/viewer/2022102923/5528b93355034666588b48e7/html5/thumbnails/11.jpg)
Alternative Maximising TheoriesAlternative Maximising Theories
Sales revenue maximisation (short run) equilibrium output and price
effect of a minimum profit constraintimplications for advertising
![Page 12: Alternative Theories of the Firm](https://reader037.vdocuments.us/reader037/viewer/2022102923/5528b93355034666588b48e7/html5/thumbnails/12.jpg)
Alternative Maximising TheoriesAlternative Maximising Theories
Sales revenue maximisation (short run) equilibrium output and price
effect of a minimum profit constraintimplications for advertisingcomparisons with short-run profit
maximising
![Page 13: Alternative Theories of the Firm](https://reader037.vdocuments.us/reader037/viewer/2022102923/5528b93355034666588b48e7/html5/thumbnails/13.jpg)
Alternative Maximising TheoriesAlternative Maximising Theories
Sales revenue maximisation (short run) equilibrium output and price
effect of a minimum profit constraintimplications for advertisingcomparisons with short-run profit
maximising
implications for the consumer
![Page 14: Alternative Theories of the Firm](https://reader037.vdocuments.us/reader037/viewer/2022102923/5528b93355034666588b48e7/html5/thumbnails/14.jpg)
Alternative Maximising TheoriesAlternative Maximising Theories
Sales revenue maximisation (short run) equilibrium output and price
effect of a minimum profit constraintimplications for advertisingcomparisons with short-run profit
maximising
implications for the consumer assessment of the theory
![Page 15: Alternative Theories of the Firm](https://reader037.vdocuments.us/reader037/viewer/2022102923/5528b93355034666588b48e7/html5/thumbnails/15.jpg)
Alternative Maximising TheoriesAlternative Maximising Theories
Growth maximisation
measuring ‘growth’
equilibrium for growth maximising firm?
Alternative theories and the consumer
![Page 16: Alternative Theories of the Firm](https://reader037.vdocuments.us/reader037/viewer/2022102923/5528b93355034666588b48e7/html5/thumbnails/16.jpg)
Multiple AimsMultiple Aims
Satisficing and the setting of targets various possible targets potential conflicts between targets
Behavioural theories of the firms the nature of behavioural theories:
descriptive target setting target conflict and search procedures organisational slack
![Page 17: Alternative Theories of the Firm](https://reader037.vdocuments.us/reader037/viewer/2022102923/5528b93355034666588b48e7/html5/thumbnails/17.jpg)
Multiple AimsMultiple Aims
Predictions of behaviour
conservatism
comparison with other firms
Satisficing and the consumer’s interest
advantages
disadvantages