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A statistical model of the firm

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  • Baaquie, Belal Ehsan

Abstract

A model of the firm is proposed that considers the firm to be a stochastic and random entity described by an action functional and the Feynman path integral. The action functional is postulated based on the profit maximization principle. The Cobb–Douglas production function and the Solow–Swan model for capital input are employed to define a specific model for the firm’s action functional. An option is defined on the profit of a firm in the framework of the statistical model. The option’s price can be studied empirically. A profit and loss sharing system of wages is defined as an extension of fixed wages.

Suggested Citation

  • Baaquie, Belal Ehsan, 2019. "A statistical model of the firm," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 524(C), pages 392-411.
    • Handle: RePEc:eee:phsmap:v:524:y:2019:i:c:p:392-411
    DOI: 10.1016/j.physa.2019.04.069
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    References listed on IDEAS

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    1. Hart, Oliver & Zingales, Luigi, 2017. "Companies Should Maximize Shareholder Welfare Not Market Value," Journal of Law, Finance, and Accounting, now publishers, vol. 2(2), pages 247-275, November.
    2. Baaquie, Belal E. & Yu, Miao & Du, Xin, 2016. "Multiple commodities in statistical microeconomics: Model and market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 462(C), pages 912-929.
    3. Baaquie, Belal E., 2013. "Statistical microeconomics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(19), pages 4400-4416.
    4. Baaquie, Belal E. & Du, Xin & Tanputraman, Winson, 2015. "Empirical microeconomics action functionals," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 428(C), pages 19-37.
    5. Baaquie, Belal E. & Cao, Yang, 2014. "Option volatility and the acceleration Lagrangian," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 393(C), pages 337-363.
    Full references (including those not matched with items on IDEAS)

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