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Contestability: A Revisionist View

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  • Cairns, Robert D
  • Mahabir, Dhanayshar

Abstract

Many claims have been made about the significance of the contribution of contestability theory to industrial organizat ion. This paper concludes that contestability theory leaves unanswere d questions about the identity of entrants and the source of their re sources. A modification to the theory is proposed. Rather than as a h indrance to potential entry, sunk costs are viewed as being of key si gnificance for the disciplining of oligopolists through potential ent ry. With the proposed modification, the analysis of the costs of mult iproduct firms may be more easily integrated with recent developments in industrial organization. Copyright 1988 by The London School of Economics and Political Science.

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  • Cairns, Robert D & Mahabir, Dhanayshar, 1988. "Contestability: A Revisionist View," Economica, London School of Economics and Political Science, vol. 55(218), pages 269-276, May.
    • Handle: RePEc:bla:econom:v:55:y:1988:i:218:p:269-76
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    Cited by:

    1. Jean-Marc Siroën, 1993. "Marchés contestables, différenciation des produits et discrimination des prix," Revue Économique, Programme National Persée, vol. 44(3), pages 569-592.
    2. Pearcy, Jason & Savage, Scott J., 2015. "Actual and potential competition in international telecommunications," International Journal of Industrial Organization, Elsevier, vol. 42(C), pages 94-105.
    3. Hanly, David & Cheung, Keith C. K., 1998. "Market structure of multi-product firms under free entry," Economics Letters, Elsevier, vol. 61(2), pages 159-163, November.
    4. Alessandro Sembenelli & Davide Vannoni, 1997. "Le decisioni di entrata e di uscita: evidenze empiriche sui maggiori gruppi italiani," L'industria, Società editrice il Mulino, issue 3, pages 505-522.
    5. Alessandro Sembenelli & Davide Vannoni, 2000. "Why Do Established Firms Enter Some Industries and Exit Others? Empirical Evidence on Italian Business Groups," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 17(4), pages 441-456, December.
    6. Dasgupta Utteeyo, 2011. "Are Entry Threats Always Credible?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-41, December.
    7. Langridge, R. & Sealey, R., 2000. "Contestability in the UK bus industry? The National Bus Company, and the "Tilling Mark II" effect," Transport Policy, Elsevier, vol. 7(2), pages 105-115, April.
    8. Office of Health Economics, 1998. "Competition and contestability between acute hospitals," Monograph 000433, Office of Health Economics.
    9. Muhammad Lawal Ahmad Bashar, 1997. "Price Control in an Islamic Economy التسعير في اقتصاد إسلامي," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 9(1), pages 29-52, January.

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