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• 1 Behavioural Theory of the Firm

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• What is different about the bahavioural theory of the firm in relation to microeconomics? 

  Microeconomics assume that firms only want to maximize their profit. In bahaviour theory of the firm, it is assumed that a firm is a coalition of groups of participants, each with their own objectives. 

• Under what circumstances will an individual continue participating? 

  When the inducement they receive is greater than the contributions. 

• Under what circumstances will the organization give inducements? 

  When the contributions are sufficient enough to keep the organization going. 

• What are participants in the firm? (6)

  1. Employees
  2. Investors
  3. Suppliers
  4. Distributors 
  5. Creditors
  6. Consumers

• What are contributions made by employees? (4)

  1. Labour hours 
  2. Ideas for improvements
  3. Relationships with their colleagues 
  4. Intelligence

• What is assumed in microeconomics when it comes to a higher pay for the same job somewhere else? 

  This person would take the higher paid job. 

• What is an aspiration level? 

  The employee will be content and not start looking for another job so long as the pay received is greater or equal to that aspiration level. 

• What problem can arise in an organization taking into account the bavioural theory of the firm? 

  Participants have their own goals, which can cause conflicts. 

• On what does the bargaining power depend of each potential participant? 

  It depends on how unique the contribution is that he can offer to the coalition. 

• What is the biggest difference when it comes to information between microeconomics and behavioural theory of the firm? 

  Microeconomics assumes that information is symmetrical and BTOTF assumes that not everyone has the same information.