2 - The nature of the megacorp
Published online by Cambridge University Press: 07 October 2011
Summary
The analysis of how prices are determined under oligopolistic conditions must begin with an examination of the megacorp, the representative firm found in that type of market structure. The megacorp, as the name implies, is a large corporation, typified by the companies included in Fortune Magazine's annual directory of the 500 largest corporations. Size alone, however, whether measured by sales or assets, is not what distinguishes the megacorp, either analytically or descriptively, from business firms in general. There are three other characteristics – each of which requires a specific modification of the conventional microanalytical apparatus – that define the megacorp as the representative firm in oligopoly. These characteristics are (1) the separation of management from ownership, this leading to a different behavioral pattern from that usually assumed in pricing models, (2) multi-plant operation with fixed factor, or technical, coefficients, this producing a different set of cost curves, and (3) membership in at least one oligopolistic industry, this giving rise to a different type of revenue curve for the individual firm. Each of these characteristics, together with their respective theoretical implications, will be discussed in turn.
The separation of management from ownership
The widespread separation of management from ownership in American corporations, first pointed out by Adolf A. Berle and Gardiner C. Means in their classic 1933 volume, has now been confirmed by a more recent study.
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- Information
- The Megacorp and OligopolyMicro Foundations of Macro Dynamics, pp. 19 - 54Publisher: Cambridge University PressPrint publication year: 1976