A Theory of Return-Seeking Firms

14 Pages Posted: 4 Apr 2017

Date Written: April 4, 2017

Abstract

We introduce a theory of return-seeking firms to study the differences between this and profit-maximising models. A return-seeking objective takes into account the opportunity cost of each additional resource input to a firm’s production as being a potential capital input choice in an alternative project. We find that firm supply curves cease to exist in perfectly competitive markets, supply curves in general may slope up as well as down, that economies of scale are necessary for production, and that firms always produce on a decreasing portion of their cost curve.

Keywords: Firm objective, firm production, supply, pricing

JEL Classification: D21, D42, D43, L2, L13

Suggested Citation

Murray, Cameron and Markey‐Towler, Brendan, A Theory of Return-Seeking Firms (April 4, 2017). Available at SSRN: https://ssrn.com/abstract=2945791 or http://dx.doi.org/10.2139/ssrn.2945791

Cameron Murray (Contact Author)

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

Brendan Markey‐Towler

Evidn ( email )

Australia

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