Hybrid Macroeconomic and Microeconomic Goals
International Journal of Economics and Research, Vol. 7, No. 6, p. 67-74, 2016
9 Pages Posted: 2 Jun 2017 Last revised: 21 Jun 2018
Date Written: December 28, 2016
This study assumes that a regulative authority imposes hybrid goal functions to the economy. Then, firms’ behavior and economic growth occur with the help of that function. In the light of this assumption, the first aim of this paper is to show that a firm’s objective function cannot be only profit maximization. As an example, it is shown that each agent maximizes his own total revenue or sales rather than profit at Cournot equilibrium, even if costs are not equal to zero. Based on this finding, this paper shows the results of assuming a principal who acts as a regulative authority and who has a goal function which includes the hybrid combination of two objectives: i) consumption maximization, ii) profit maximization. Results show that if weight that the regulative authority imposes to the firms for profit maximization rises, then i) weight that the principal imposes to the economy for consumption maximization falls, ii) weight that the principal imposes to the economy for profit maximization rises.
Keywords: Economic Growth, Consumption Maximization, Profit Maximization, Sales Maximization
JEL Classification: O40, D40, D43
Suggested Citation: Suggested Citation