Contestable Markets Theory

Discipline: Economics

Developed by American economist William Baumol (1922-), contestable markets theory defines contestability as the effectiveness of barriers to entry and exit in a market. Perfect competition, with complete freedom of movement, is perfectly contestable.

By removing or reducing barriers, competition will be enhanced.

Also see: imperfect competition, monopolistic competition, structure-conduct-performance theory

Source:
W J Baumol, J C Panzar and R D Willig, Contestable Markets and the Theory of Industry Structure (New York, 1982)

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