Question

Who is Baulmol and what is his theory?

Please explain in a simple and understandable manner.

Answer 1

1) :- William J Baulmol was American economist .he was professor of economic subject in NewYork university. He was author of a more than eighty book and several journal.

Traditional theory states that the number of firms in the market determines competitiveness in an industry. In reality, though most industries are oligopolistic we say still say that they are highly competitive. This brings us to the theory of contestable markets proposed by William Baumol which states that:

"Potential competition, not actual competition determines how firms behave in the market and how efficient they are"
The cornerstone of contestable market theory states that for a market to be contestable, there has to be no barriers to entry or exit. This ensures that even though a firm may be the only firm in the market, it may behave as if there are other firms in the market because it is relatively easy for new firms to join. This explains why the market is already contestable in the perfectly and monopolistically competitive markets.