Developments of Profit-Maximisation Models
A number of major developments have been made to the theory of profit-maximising firms in order to meet the fairly intense criticism of the early models and also to bring them more into line with empirical evidence. There has also, of course, been intensive activity on the technical level, extracting more and more detailed results from the basic models — results which now form the major part of any modern micro-economic textbook (see Baumol , Hadar , Horowitz ). Important though these technical efforts have been, they have contributed largely an extension of our knowledge of the implications of the basic model. And that, of course, is what they were intended to do. But there have also been developments which have significantly altered the basic models so as to change radically our predictions about the way in which profit-maximising firms will behave. It is to discussing a number of the more important of these radical developments t hat the rest of this chapter is devoted.
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