Alternative theories of firm:

Traditionally decision-making by firms is analysed at the equality of marginal cost (MC) and the marginal revenue (MR). Such a condition satisfies their profit maximisation objective. However, the MR = MC principle has been attacked on various ground. One of them being that the firm to be able to do this must know its cost and demand curves with certainty, which is quite difficult. Secondly, this principle is a  fall-out of profit maximising objective of a firm. But then as many economists have pointed out and which has enjoyed a fair degree of empirical support, firms do not generally opt for profit maximisation. They have a multitude of goals and profit maximisation is just one of them.   

The traditional theories of firm had analysed the decision-making on the basis of the objective of profit maximisation. As an alternative, Baumol had put forward the notion that the firms maximise sales revenue. Williamson analyses the case for a firm which it maximises the managerial utility function subject to a profit constraint. Marris in his model shows the equilibrium as a fallout of maximisation of both the owners and the managers.