Editing Contestable market (section)

==Application==
The theory of contestable markets has been used to argue for weaker application of [[competition law|antitrust laws]], as simply observing a monopoly market may not prove that a firm is exploiting its [[market power]] to control the price level.<ref>For example, Greenspan, 1998.</ref> Baumol himself argued based on the theory for both deregulation in certain industries and for more regulation in others.<ref>Brock, 1983. p. 1064. "Baumol et al.'s plea for removal of artificial barriers to entry and exit is to be applauded.... I am more skeptical about their conclusions that occasionally it is good public policy to restrict entry and competition."</ref>

The applicability of the theory to real-world situations may be questioned, however, particularly as there are very few markets which are completely free of [[sunk costs]] and entry and exit barriers.<ref>Brock, 1983. p. 1057. "Some readers may feel that perfect contestability is an idealized notion of purely academic interest..."</ref> Low-cost airlines remain a commonly referenced example of a contestable market; entrants have the possibility of leasing aircraft and should be able to respond to high profits by quickly entering and exiting.<ref name="Brock1055"/> However, it is now generally admitted that Baumol's judgment that the US airline industry was therefore best left deregulated was incorrect since the now duly deregulated industry is "well on its way" to evolving into a concentrated [[oligopoly]].<ref name="Martin43">Martin, 2000. p. 43.</ref> More generally, experimental evidence collected since the publication of Baumol's paper has suggested that perfectly competitive markets would, if they existed, behave in the way Baumol outlined, but the performance of imperfectly contestable markets (i.e. real-world markets) depends "on actual rather than potential competition" perhaps in part due to the range of "strategic responses" available to incumbents that were not considered by Baumol as part of his theory.<ref name="Martin43"/>