Abstract
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.
| Original language | English |
|---|---|
| Pages (from-to) | 23-40 |
| Number of pages | 18 |
| Journal | European Journal of Political Economy |
| Volume | 6 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - 1 Jan 1990 |
Funding
*l would like to thank the Professors M.J. Holler, J.A.H. Maks and two anonymous referees for their valuable comments on an earlier draft of this paper. Of course, remaining errors and omissions are mine. The author is very grateful for the support of Professor W.J. Baumol, the C.V. Starr Center for Research in Applied Economics of New York University and the Dutch Organization of Scientific Research.
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SDG 17 Partnerships for the Goals
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