Nanoeconomics: A Statistical Model of Company Profit Influenced by Individual Interests of Managers

Igor Sokolov and Anatoly Katyshev

Applied Economics and Finance, 2017, vol. 4, issue 1, 53-71

Abstract: A concept and mathematical model of modern economics are formulated in which a company profit is defined when taking into account possible interests of individual decision makers rather than based exclusively on benefits of either the company (ground of microeconomics) or the whole society (ground of macroeconomics). We call this approach ¡°nanoeconomics¡± as a terminological step down from macro- and micro- economics. The growing gap between interests of the business owner and decision makers in large corporations is obviously detrimental for the company performance. Here we formulate a statistical model to describe this situation quantitatively. In this model, the company profit is an accumulative effect of statistical contributions of a variety of decisions of individual decision-makers, rather than looking at the company as a whole (microeconomics). The model demonstrates the decrease of profit of the company compared to the microeconomic estimation. We study a relative contribution to the profit decrease from different human factors considered in the model, ¡°careerism¡± and ¡°expertise¡± of the decision-making managers, their ¡°loyalty¡± to the company, and the lack of strong company management (¡°decentralization¡±).

Keywords: economics models; decision makers; individual interests; agent-based models (search for similar items in EconPapers)
Date: 2017
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