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Alternative Theories of the Firm

Alternative Theories of the Firm

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Published by: api-3825580 on Oct 18, 2008
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03/18/2014

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Alternative Theories
of the Firm
Problems with Traditional Theory
sDifficulties in maximising profit

(non-use of opportunity cost
(difficulties in identifying demand &MR
(difficulties in deciding the time period for

maximising profit
sAlternative aims

(separation of ownership and control
(the principal\u2013agent problem
(managerial utility maximisation
(profit satisficing

Alternative Maximising Theories
sLong-run profit maximisation
(implications for investment and short-run
pricing and output
(difficulties in testing the theory
sManagerial utility maximisation
(factors determining managers\u2019 utility

3salary
3security
3dominance
3professional excellence

(implications for firms\u2019 behaviour
(importance of economic environment

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