Motives of the firm

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  • Motives of the firm
    • Profit maximisation
      • Supernormal profits at their greatest
      • MC=MR
      • Marginal cost must be rising
    • Revenue maximisation
      • Firm seeks to maximise revenue
      • Willing to sell until last unit sold adds nothing to TR
      • When MR is positive, it continues to add to TR
      • When MR passes 0, and becomes negative, TR starts to decline.
      • MR=0
    • Sales maximisation
      • When a firm attempts to sell as much as possible without making a loss
      • AC=AR
      • To gain market share
      • Drive out competition
    • Satisficing
      • Making just enough profit to keep stakeholders happy
      • Allows for other motives
    • Pricing strategies
      • Predatory pricing
        • Pricing below costs to drive out competiton
      • Limit pricing
        • Pricing at a level low enough to discourage new firms to enter
    • Non-pricing strategies
      • Marketing/ad-vertising
      • Mergers
      • Investment in branding
      • Untitled
      • Customer service
      • Product development
      • Quality
      • Innovation


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