CONTESTABLE MARKETS, THE NEOCLASSICAL MARKET MODEL AND THE THEORY OF COMPETITION

The theory of perfect contestable markets should serve as a generalization of the concept of the perfect competitive market. It is analyzed whether this stands and whether the theory possesses a possibility of applicability in reality. The existence of sunk costs concerning the factor of production labour is stressed. The competition policy-conclusions, which are drawn by the theory, impose an analysis from the standpoint of competition theory. It is shown that both claims of the theory do not hold.