profit constraint

Earnings fell 26 percent in the second quarter, and the company said some of its profit constraints could continue.

A minimum profit constraint exists for the firms to be able to pay dividends to their share holders.

For example, consider a firm that maximizes its sales revenue subject to a minimum profit constraint.

Thus it is very important to distinguish between the two as further in the model we would have to maximize the managerial utility function given the profit constraint.

They examine the impact of an absolute profit constraint, a percentage markup constraint,, and a rate of return constraint as before,.

Staff expenditure of less than B and more than C is not feasible as it wouldn't satisfy the minimum profit constraint and would in turn threaten the job security of managers.

In fact, if anything, the bank's constraint on managers seems the most like that modelled in Baumol (1959), Williamson (1963) etc. - that is, a minimum profit constraint.

Traditional managerial models typically assume that managers, instead of maximising profit, maximise a simple objective utility function (this may include salary, perks, security, power, prestige) subject to an arbitrarily given profit constraint (profit satisficing).

It should however be noted that while profit maximization is not regarded as a goal, it is accepted in managerial theories that there is a profits constraint, either because a minimum level of profitability is a condition of survival of the enterprise, or to necessary to protect management from loss of office through take-over.