TY - JOUR
T1 - Contestability and investment in average cost reduction
AU - Van Witteloostuijn, Arjen
PY - 1990/1/1
Y1 - 1990/1/1
N2 - The current pillar of the assumption of free entry and (costless) exit is perfect contestability. The perfect contestability framework serves well as a static benchmark case of competition. However, existing contestable market models fail to endogenize technological progress. The purpose of this paper is twofold: first, technological progress is endogenized in a contestability setting; and, second, it is argued that even with a positive sunk cost contestability can be guaranteed. The focus is on a special case of investment: reduction of average cost.
AB - The current pillar of the assumption of free entry and (costless) exit is perfect contestability. The perfect contestability framework serves well as a static benchmark case of competition. However, existing contestable market models fail to endogenize technological progress. The purpose of this paper is twofold: first, technological progress is endogenized in a contestability setting; and, second, it is argued that even with a positive sunk cost contestability can be guaranteed. The focus is on a special case of investment: reduction of average cost.
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U2 - 10.1016/0176-2680(90)90034-G
DO - 10.1016/0176-2680(90)90034-G
M3 - Article
AN - SCOPUS:44949266506
SN - 0176-2680
VL - 6
SP - 23
EP - 40
JO - European Journal of Political Economy
JF - European Journal of Political Economy
IS - 1
ER -
