Please use this identifier to cite or link to this item:
https://doi.org/10.48548/pubdata-1162
| Resource type | Working Paper |
| Title(s) | The Contestable Markets Theory: Efficient Advice for Economic Policy |
| DOI | 10.48548/pubdata-1162 |
| Handle | 20.500.14123/1225 |
| Creator | Growitsch, Christian  12443357XWein, Thomas  0000-0001-7443-3253 170739767 |
| Abstract | During the nineties of the last century, several formerly monopolistic markets (telecommunication, electricity, gas, and railway) have been deregulated in Germany based on European directives and theoretically inspired by the theory of contestable markets. The original contestable market theory implied three assumptions necessary to be satisfied to establish potential competition: Free market entry, market exit possible without any costs, and the price adjustment lag exceeding the entry is shows that if the incumbent reduces its prices slowly (high adjustment lag) and the market entry can be performed quickly (low entry lag), a new competitor will be able to earn back sunk costs. Therefore it is not necessary that all three conditions are complied with for potential competition to exist. Applying this 'revised' contestable market theory to the deregulated sectors in Germany sections, natural monopolies can be identified in telecommunication local loops and local/regional connection networks, in the national electricity grid and the regional/local electricity distribution networks, in the national and regional/local gas transmission/distribution sections, and in the railroad network only. These sections are not contestable due to sunk costs, high entry lags expected and a probable short price adjustment lag. They are identified as bottlenecks which should be regulated. The function of system operators in energy and railroad are closely related to the non contestable monopolistic networks. |
| Language | English |
| Keywords | Wirtschaftspolitik |
| Year of publication in PubData | 2002 |
| Publishing type | First publication |
| Publication version | Draft |
| Date issued | 2002-10-07 |
| Creation context | Research |
| Published by | Medien- und Informationszentrum, Leuphana Universität Lüneburg |
Files in This Item:
| File | Size | Format | |
|---|---|---|---|
274.pdf License: Nutzung nach Urheberrecht open-access | 57.84 kB | Adobe PDF | View/Open |
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