Managerial objectives and the Pricing Strategies

... Managerial objectives and the Pricing Strategies Section 1: Managerial Objectives 1.1 The essence of managerial objectives We assumed that the firm's primary objective is to maximize profit. This assumption underlies the competitive environment, which we mapped out using the frameworks of the perfect competition, monopoly, monopolistic competition and oligopoly market models, and which allowed us to establish benchmarks for the analysis and comparison of price-output decisions under different market structures. This approach, often referred to as the traditional (or 'neoclassical') approach, can readily be criticized, however, on the grounds that it does not provide a satisfactory explanation of real-world production and pricing decisions. By assuming away many complexities, the simplistic assumption of profit maximization enables us to make very clear-cut predictions about the firm's behaviour However, it is one thing to make predictions, but another to say how realistic they are or how accurate they are. The traditional theory of the firm seems to be

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