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Profit maximization

Brueckner, M. (2013) Profit maximization. In: Idowu, S.O., Capaldi, N., Zu, L. and Das Gupta, A., (eds.) Encyclopedia of Corporate Social Responsibility. Springer, Heidelberg, Germany, pp. 1921-1927.

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Within neoclassical economic theory, profit maximization is a necessary behavioral assumption that dictates how firms make output and pricing decisions. The profit-maximizing behavior of firms is believed to drive economic efficiency, which stands for the efficient allocation of resources in the face of relative scarcity. The realization of economic, or allocative, efficiency is assumed to maximize the utility or welfare of both individuals and society. The dual realization of maximum private and social benefit is the foundation of utilitarian thought, which strives for the greatest good for the greatest number of people. The utilitarian logic is embedded culturally and legally in the Anglo-American context, where profit maximization represents the raison d’être of the American corporation and the accepted primary goal in US business activity.

Item Type: Book Chapter
Murdoch Affiliation(s): School Of Business and Governance
Publisher: Springer
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