To explain changes in outputs and inputs, and therefore changes in productivity, we need to know something about managerial behaviour. The existence of different sets and functions has few, if any, implications for behaviour. The existence of revenue functions, for example, does not mean that managers will choose outputs in order to maximise revenues, and the existence of cost functions does not mean they will choose inputs to minimise costs. Instead, different managers will tend to behave differently depending on what they value, and on what they can and cannot choose. For example, if managers value goods and services at market prices, then, if possible, they will tend to choose outputs and inputs to maximise profits. This chapter discusses some of the simplest optimisation problems faced by firm managers.
- Chambers R, Quiggin J (2000) Uncertainty, production, choice and agency: the state-contingent approach. Cambridge University Press, Cambridge, UKGoogle Scholar