Changing Objectives of Firms and Managerial Preferences: A Review of Models in Microeconomics

  • B Pradeep Kumar Assistant Professor of Economics, Government Arts & Science College, Ambalapuzha, Kerala & Research Supervisor, University of Kerala, Thiruvananthapuram, India
Keywords: Profit maximization, Sales maximization, Managerial utility function, Managerial discretionary powers, Slacks and salaries, Behavioral economics


Theoretically, producer behavior models postulate that firms have had different objectives ranging from profit maximization to setting aspirational levels. The assumption of the objective of profit maximization was shaped based on the rationality principles, which has lost relevance with the coming of the principle of behavioral economics in recent time. The present paper intends to throw some light on changes that have been made in the objective of firms over years and attempts to review some models emphasizing managerial utility as the core objective of firms.

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