MBS/MBA Managerial Economics

Value Maximization Model

Introduction Value maximization theory was developed as an alternative to the profit maximization theory due to weaknesses or limitations of profit maximization theory. This theory is also known as wealth maximization theory. According to this theory, value or wealth maximization is the long-run objective of the firm that guides resource allocation decisions of the firm […]

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Simon’s Theory of Satisficing

Herbert Alexander Simon one of the pioneers of behavioral theory dissatisfied with the profit-maximizing model and gave his own model in 1955 and called Simon’s Theory of Satisficing. Therefore, his theory was satisfying behavioral theory. He said that instead of maximizing profits, the business firms aim at merely satisficing. It means as per him, producers

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Sales Revenue Maximization Model/Baumol’s Model to Theory of the Firm

Introduction William J. Baumol confronted the assumption of profit maximization and argued that maximization of sales rather than profit is the ultimate objective of the firm. So, a firm should direct its energies on promoting and maximizing sales. He, therefore, called his hypothesis as Sales Revenue Maximization hypothesis.  The sales maximization model is thus an alternative

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