Professional Documents
Culture Documents
Managerial DiscretionModels
Baumols model
managers rewards seem to be more closely linked to size than to profit therefore, firms aim to maximize sales revenue but subject to a profit constraint
TR
p max
0
constraint rev.max
ps
Qp max
Qp constraint
Qs revenue max
U0 = f *(gc)
where gc = rate of growth of capital.
Debt ratio
Retention ratio
Cyert and March Behavioural Theory 3. The Goals of the Firm: Satisficing Behaviour
Goals set by top management.