Williamsons model of managerial discretion

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Williamson model of managerial discretion

Emphasizes

the ability of managers to maximize their own Utility

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The basic theme of model

Manager

of the firm have discretion in pursuing polices

Manager

derive their utility from there expense performance

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utility or expense performance function is defined as. U= f(S, M, ID ) Where S = additional expenditure of the staff M= Managerial emoluments ID = Discretionary Investments

Managerial

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earning minimum profit the additional profit can be used to increase managerial utility D =-o Minimum profit (o), actual profit () , discretionary profit (D) .

After

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