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Showing posts with the label returns to scale

Decision Making as Output and Bounded Rationality

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  The classical economics theories proceed on the assumption of rational agents. Rationality implies the economic agents undertake actions or exercise choices based on the cost-benefit analysis they undertake. The assumption further posits that there exists no information asymmetry and thus the agent is aware of all the costs and benefits associated with the choice he or she has exercised. The behavioral school contested the decision stating the decisions in practice are often irrational. Implied there is a continuous departure from rationality. Rationality in the views of the behavioral school is more an exception to the norm rather a rule. The past posts have discussed the limitations of this view by the behavioral school. Economics has often posited rationality in the context in which the choices are exercised rather than theoretical abstract view of rational action. Rational action in theory seems to be grounded in zero restraint situation yet in practice, there are numerous restra
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The Economics Origins of BCG Matrix

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  Economics has diversity of applications across streams. The applications range from management to business studies to national economies to politics to societies to history among others. Economics by its very nature has direct applications in the field of business theory. Many business theories, concepts, models, principles or whatever they might be have their origin in the domain of economics. The past posts have discussed such examples from the field of management theory that can be traced to economic roots. One such application that would be discussed in the current post would be the Boston Consulting Group (BCG) Matrix. Sometime back, there was a discussion on the application of BCG matrix in the context of sports popularity and innovation. The current post however would seek to locate BCG matrix in the context of economic theories and models.   As is well known to students of management, BCG matrix finds its application in product portfolio management. The products in the fi
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BCG, PLC and Returns to Scale

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  Management practitioners have their own jargons. Without doubt these terminologies developed help conceptualize ideas and their implementation in practice. While the observations lead to the formation of theory, it is equally true that the theoretical formulations thus developed play an input in strategy and tactics of a firm. Many management jargons and concepts owe their origin to concepts or models elucidated in economics. It would be prudent to discuss these concepts often used in management to their roots in economics. It must be stated that these roots might have often emerged subconsciously without a reference to the economic underpinnings. The current post will deal with a couple of such concepts.   One of the critical understandings that practitioners seek to pursue in product development is the product life cycle. It conceptualizes the journey of the product from its inception to its end cycle or the decline or perhaps death. It does give insights to the practitioners o
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