PubData Leuphana Repository: The Contestable Markets Theory: Efficient Advice for Economic Policy

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Ressourcentyp	Arbeitspapier
Titel	The Contestable Markets Theory: Efficient Advice for Economic Policy
DOI	10.48548/pubdata-1162
Handle	20.500.14123/1225
Autor*in	Growitsch, Christian 12443357X Wein, 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.
Sprache	Englisch
Schlagwörter	Wirtschaftspolitik
Jahr der Veröffentlichung in PubData	2002
Art der Veröffentlichung	Erstveröffentlichung
Publikationsversion	Entwurf
Datum der Erstveröffentlichung	2002-10-07
Entstehungskontext	Forschung
Veröffentlicht durch	Medien- und Informationszentrum, Leuphana Universität Lüneburg