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A Theory of Return-Seeking Firms

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  • Murray, Cameron

    (The University of Sydney)

  • Markey-Towler, Brendan

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.

Suggested Citation

  • Murray, Cameron & Markey-Towler, Brendan, 2019. "A Theory of Return-Seeking Firms," OSF Preprints hzmga_v1, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:hzmga_v1
    DOI: 10.31219/osf.io/hzmga_v1
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    References listed on IDEAS

    as
    1. John Shea, 1993. "Do Supply Curves Slope Up?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(1), pages 1-32.
    2. Walter Y. Oi, 1962. "Labor as a Quasi-Fixed Factor," Journal of Political Economy, University of Chicago Press, vol. 70(6), pages 538-538.
    3. Graham, John R. & Harvey, Campbell R., 2001. "The theory and practice of corporate finance: evidence from the field," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 187-243, May.
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