Enrique A. Bour
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Contestability: A New Paradigm of the Oligopoly or A Blind Alley?
By Enrique A. Bour, April 2011

This article reviews some basic results associated with the theory of contestable markets, put forward by William J. Baumol, John C. Panzar and Robert D. Willig in 1982. We maintain throughout the paper a theoretical approach, rather than reviewing the great deal of applications of the theory to several sectors. We review developments that took place since then, as well as some criticisms that objected, mainly, the claim that it could constitute a real alternative to the traditional microeconomic analysis of markets. We conclude that the theory of contestable markets, although it suffers from a lack of appropriate consideration of a game-theoretic nature and some conceptual deviations from the mainstream, is to be considered a real progress in the formulation of practical policies directed to market efficiency.

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Last Updated ( Sunday, 24 April 2011 )
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