1. Alternative Theories of the Firm

2. Problems with Traditional Theory n Difficulties in maximising profit < non-use of opportunity cost < difficulties in identifying demand & MR < difficulties in deciding the time period for maximising profit n Alternative aims < separation of ownership and control < the principal–agent problem < managerial utility maximisation < profit satisficing

3. Alternative Maximising Theories n Long-run profit maximisation < implications for investment and short-run pricing and output < difficulties in testing the theory n Managerial utility maximisation < factors determining managers’ utility F salary F security F dominance F professional excellence < implications for firms’ behaviour < importance of economic environment

4. Alternative Maximising Theories n Sales revenue maximisation (short run) < equilibrium output and price

5. Sales revenue maximising output £ Q O TR

6. £ Q O Q1Q1 Sales revenue maximising output

7. £ Q O TC TR Q1Q1 Sales revenue maximising output

8. £ Q O TC TR Q2Q2 Q1Q1 Sales revenue maximising output

9. Alternative Maximising Theories n Sales revenue maximisation (short run) < equilibrium output and price F effect of a minimum profit constraint

10. £ Q O  TC TR Q2Q2 Q1Q1 Q3Q3 Total profit Sales revenue maximising with a profit constraint

11. Alternative Maximising Theories n Sales revenue maximisation (short run) < equilibrium output and price F effect of a minimum profit constraint F implications for advertising

12. Alternative Maximising Theories n Sales revenue maximisation (short run) < equilibrium output and price F effect of a minimum profit constraint F implications for advertising F comparisons with short-run profit maximising

13. Alternative Maximising Theories n Sales revenue maximisation (short run) < equilibrium output and price F effect of a minimum profit constraint F implications for advertising F comparisons with short-run profit maximising < implications for the consumer

14. Alternative Maximising Theories n Sales revenue maximisation (short run) < equilibrium output and price F effect of a minimum profit constraint F implications for advertising F comparisons with short-run profit maximising < implications for the consumer < assessment of the theory

15. Alternative Maximising Theories n Growth maximisation < measuring ‘growth’ < equilibrium for growth maximising firm? n Alternative theories and the consumer

16. Multiple Aims n Satisficing and the setting of targets < various possible targets < potential conflicts between targets n Behavioural theories of the firms < the nature of behavioural theories: descriptive < target setting < target conflict and search procedures < organisational slack

17. Multiple Aims n Predictions of behaviour < conservatism < comparison with other firms n Satisficing and the consumer’s interest < advantages < disadvantages