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Contrary to what the neoclassical theory of the firm teaches, Professor Baumol suggested 3, 187 the typical large corporation in the United States seeks to maximize not its profits but its total revenues which the businessman calls his sales . . . subject to a minimum profit constraint. This hypothesis was based on Baumol's rather spotty observation of business behavior. The purpose of this study is to test empirically the revenue maximization (RM) Hypothesis. At the outset, it must be emphasized that we do not expect to find RM among all firms; nor did Baumol claim such generality. More specifically, the RM hypothesis pertains primarily to large firms falling into two classifications:
Amihud et al. (Mon,) studied this question.