
Published online:
26 September 2013
Published in print:
10 April 2013
Online ISBN:
9780804783224
Print ISBN:
9780804758307
Contents
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OUTLINE OF THIS CHAPTER OUTLINE OF THIS CHAPTER
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THEORIES OF VALUE: NEOCLASSICAL ECONOMICS THEORIES OF VALUE: NEOCLASSICAL ECONOMICS
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The Introduction of the Marginalist School The Introduction of the Marginalist School
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Price-Setting in the Marginalist Setting Price-Setting in the Marginalist Setting
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The Firm and Price in the Neoclassical Model The Firm and Price in the Neoclassical Model
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Two Assertions About the Neoclassical Model Two Assertions About the Neoclassical Model
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CONSUMER WELFARE AND PREFERENCES CONSUMER WELFARE AND PREFERENCES
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Microeconomic Foundations: Preferences and Utility Microeconomic Foundations: Preferences and Utility
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Consumer Preference Axioms Consumer Preference Axioms
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Commonsense Observations About Human Nature Commonsense Observations About Human Nature
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INCORPORATING TIME PREFERENCE INCORPORATING TIME PREFERENCE
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Recognition of Time Recognition of Time
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Rationales for Time Preference Rationales for Time Preference
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The Consumer’s Savings Problem: First Glance The Consumer’s Savings Problem: First Glance
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TIME-SEPARABLE AND RECURSIVE UTILITY TIME-SEPARABLE AND RECURSIVE UTILITY
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Time-Separable Utility Time-Separable Utility
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Recursive Utility Recursive Utility
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Differences Among Valuation Approaches Differences Among Valuation Approaches
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RISK AVERSION RISK AVERSION
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The Interesting Case of Risk-Neutral Behavior The Interesting Case of Risk-Neutral Behavior
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Specifying Attitudes Toward Risk Specifying Attitudes Toward Risk
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Common Attitudes Toward Risk Common Attitudes Toward Risk
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THE NEOCLASSICAL MODEL AND THE ACTUAL WORLD THE NEOCLASSICAL MODEL AND THE ACTUAL WORLD
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Observations on the Neoclassical Model Observations on the Neoclassical Model
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Does the Neoclassical Model Describe the Actual World? Does the Neoclassical Model Describe the Actual World?
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Historical Criticism of the Neoclassical Model of the Firm Historical Criticism of the Neoclassical Model of the Firm
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A Counterexample: The Oil Industry A Counterexample: The Oil Industry
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Conclusion: The Failure of the Neoclassical Model of the Firm Conclusion: The Failure of the Neoclassical Model of the Firm
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THE BEHAVIORIST SCHOOL THE BEHAVIORIST SCHOOL
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Bounded Rationality and Rational Expectations Bounded Rationality and Rational Expectations
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The Behaviorist Critique The Behaviorist Critique
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Differences Between the Behavioral and Classical Approaches Differences Between the Behavioral and Classical Approaches
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Prospect Theory Prospect Theory
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References on Behavioral Economics and the Classical Reassertion References on Behavioral Economics and the Classical Reassertion
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VALUATION APPLICATION: NEOCLASSICAL EQUILIBRIUM VALUATION APPLICATION: NEOCLASSICAL EQUILIBRIUM
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S. H. Importers S. H. Importers
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A & A Consulting A & A Consulting
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ExxonMobil ExxonMobil
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Chapter
8 VALUE IN NEOCLASSICAL ECONOMICS
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Pages
96–112
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Published:April 2013
Cite
Anderson, Patrick L., 'VALUE IN NEOCLASSICAL ECONOMICS', The Economics of Business Valuation: Towards a Value Functional Approach (Redwood City, CA , 2013; online edn, Stanford Scholarship Online, 26 Sept. 2013), https://doi.org/10.11126/stanford/9780804758307.003.0008, accessed 14 May 2025.
Abstract
The neoclassical model is familiar to generations of college students. This chapter reviews the emergence of the neoclassical or “marginalist” school of economics in the late 19th century, and its formal elements and basic mathematics. It notes elements of the theory that are not settled: utility, risk aversion, and time preference, and discusses the critique of the “behaviorist.” The author then tests the neoclassical model as a practical valuation tool for a business, applying it to three actual businesses. This analysis shows the neoclassical model is not a practical valuation tool.
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