Book Series
Theories of the Firm
Fifth Edition
Demetri Kantarelis


Despite the importance of profit-making firms in our market economies, and the vast amount of published research about them, the majority of textbooks in economics for students in undergraduate and graduate courses continue to rely on one theory to describe the firm, namely the neoclassical theory of the firm. However, although the theory has delivered classic theoretical principles and has extensively been utilised in policy, especially pricing and regulation, it does not answer some key questions addressed by other theories of the firm.

The objective of this book is to describe essential microeconomics for profit-making business firms. Specifically, after descriptions of the firm's external business environment and some decision-making models, an effort is made to re-discuss certain parts of the Neoclassical Theory of the Firm and additionally describe the Transactions Cost Theory of the Firm, the Principal-Agent Theory of the Firm, and the Evolutionary Theory of the Firm.

The 5th edition has been enriched with new content on the firm as a money-managing entity especially as it relates to stock acquisition mortgage loans (Chapter 6).

As with the previous edition, the book's intended audiences are upper level undergraduate students in economics, first year graduate students in economics and business, law school students as well as entrepreneurs and business executives. The book may be used as a textbook in 'Theories of the Firm' courses or seminars and as a supplemental reading in intermediate or first year graduate courses in 'Industrial Organisation', 'Microeconomics', 'Managerial Economics' or 'Economics for Managers', 'Contracts', 'Torts', 'Corporations', 'Deals', 'Venture Capital' and other courses.