Jump to ContentJump to Main Navigation
A Course in Microeconomic Theory$
Users without a subscription are not able to see the full content.

David M. Kreps

Print publication date: 2020

Print ISBN-13: 9780691202754

Published to Princeton Scholarship Online: May 2021

DOI: 10.23943/princeton/9780691202754.001.0001

Show Summary Details
Page of

PRINTED FROM PRINCETON SCHOLARSHIP ONLINE (www.princeton.universitypressscholarship.com). (c) Copyright Princeton University Press, 2022. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in PRSO for personal use.date: 20 May 2022

Theories of the firm

Theories of the firm

(p.722) (p.723) Chapter Nineteen Theories of the firm
A Course in Microeconomic Theory

David M. Kreps


This chapter focuses on models of the firm that have the firm as the unit of analysis when they become formal. The classic theory of the firm as a profit-maximizing production possibilities set is the starting point, and it begins by attacking the notion that profit maximization is what a firm does or ought to do. The chapter then discusses so-called managerial models of the firm, where the firm is conceived of as a production possibilities set that does not maximize profits but pursues some other goal that reflects the interests of managers: maximization of sales revenue, or of capital, or of the probability of a “satisfactory” level of profits. Finally, it considers a very different conception of the firm. In this approach, firms are dynamic entities, which at a given point of time, are described by a production routine and which evolve according to environmental factors through patterns of search and imitation, looking for better routines.

Keywords:   firms, profit-maximizing production, profit maximization, managerial models, production possibilities, managers, production routine

Princeton Scholarship Online requires a subscription or purchase to access the full text of books within the service. Public users can however freely search the site and view the abstracts and keywords for each book and chapter.

Please, subscribe or login to access full text content.

If you think you should have access to this title, please contact your librarian.

To troubleshoot, please check our FAQs , and if you can't find the answer there, please contact us.