Question

Williasans theory of managegerial utility maximiation

Answer 1

Williamson’s Utility Maximisation Theory!

Williamson’s Utility Maximisation Theory!Williamson has developed managerial-utility-maximisation theory as against profit maximisation. It is also known as the ‘managerial discretion theory’. In large modem firms, shareholders and managers are two separate groups. The shareholders want the maximum return on their investment and hence the maximisation of profits. The managers, on the other hand, have consideration other than profit maximisation in their utility functions. Thus the managers are interested not only in their own emoluments but also in the size of their staff and expenditure on them.