ABSTRACT
Contestability theory led to a prolific amount of research. One source of contention has been the restrictive conditions, such as the assumption of zero sunk costs. In general, although contestability theory is considered to have some merit, the conditions are too restrictive for it to serve as a real disciplinary device for monopolies. SCHWARTZ synthesizes a range of research looking at the issues from a variety of perspectives. BAUMOL & WILLIG update and address some of the issues and state that the concept of “perfect contestability” is meant to be a benchmark.
