Marginal Value Theorem
Companies should exit customers, markets, or products when marginal return falls below the expected return from next-best alternatives.
Leave the bush while berries remain - the starling that leaves early collects more berries per unit time over a full day of foraging.
The marginal value theorem, formalized by Eric Charnov in 1976, predicts when organisms should leave a resource patch. The principle states: Leave a patch when marginal gain in current patch equals average gain across environment. In practice, this means staying while returns are high (initial berries picked quickly), leaving when returns drop below environmental average (picking slows down), traveling to next patch (incurring travel cost), and repeating. The counter-intuitive insight is that organisms should leave while food still remains - staying until empty wastes time because the opportunity cost of staying (missing better patches) exceeds the value of remaining resources.
Business Application of Marginal Value Theorem
Companies should exit customers, markets, or products when marginal return falls below the expected return from next-best alternatives. Market leadership in a declining patch is worth less than small share in a growing patch.
Discovery
Eric Charnov (1976)
Formalized the mathematical principle for optimal patch departure timing