Download - 10. alternative theory of the firm
Problems 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
Alternative 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
� salary� security� dominance� professional excellence
� implications for firms’ behaviour� importance of economic environment
Alternative Maximising Theories
� Sales revenue maximisation (short run)
� equilibrium output and price
Alternative Maximising Theories
� Sales revenue maximisation (short run)� equilibrium output and price
� effect of a minimum profit constraint
Alternative Maximising Theories
� Sales revenue maximisation (short run)� equilibrium output and price
� effect of a minimum profit constraint
� implications for advertising
Alternative Maximising Theories
� Sales revenue maximisation (short run)� equilibrium output and price
� effect of a minimum profit constraint
� implications for advertising
� comparisons with short-run profit maximising
Alternative Maximising Theories
� Sales revenue maximisation (short run)� equilibrium output and price
� effect of a minimum profit constraint
� implications for advertising
� comparisons with short-run profit maximising
� implications for the consumer
Alternative Maximising Theories
� Sales revenue maximisation (short run)� equilibrium output and price
� effect of a minimum profit constraint
� implications for advertising
� comparisons with short-run profit maximising
� implications for the consumer
� assessment of the theory
Alternative Maximising Theories
� Growth maximisation
� measuring ‘growth’
� equilibrium for growth maximising firm?
� Alternative theories and the consumer
Multiple 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