Marris Growth Maximisation Theory


    Rep:
    Can anyone give me a brief run-down of this?

    I have to produce a report and I have to include this theory somewhere, but I was away for the lesson my teacher went through it. It doesn't have to be in-depth I just need the jist of it.

    Rep:
    (Original post by Gascoigne)
    Can anyone give me a brief run-down of this?

    I have to produce a report and I have to include this theory somewhere, but I was away for the lesson my teacher went through it. It doesn't have to be in-depth I just need the jist of it.
    OK, this is off the top of my head, from 2 weeks ago.

    It's along the lines that managers want maximum growth to be happy, and the model is set up so that this also makes the owners/shareholders fully happy. Critisism are that the model ignores oligopoly.

    Rep:
    The Marris theory considers the Utility associated with managers and owners and the growth of supply and demand.

    U Managers = f(Salaries, powers, status, job security)
    U Owners = f(profit, capitol, output, public esteem)

    Marris argues that the goals of both managers and owners are also very similar as most of the variables in the functions are strongly correlated with a single variable : "The Size of The Firm!"
    => Although they both have different types of utilities (assumed to be selfish), they both want to control the size of the firm and both agree on how it should grow.

    U Managers = f(g)d as they want to show shareholders that they have increased interest in the product

    U Owners = f(g)s as they want the value of the firm to increase and to own more capitol.


    This theory is often compared with Baumol's Sales maximising model and Williamson's Managerial discretion model.

    Does that make much sense? I've got an exam in an hour and thought I'd give it a go on my understanding so far.

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: January 26, 2010

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