The paper shows that Bertrand competition and contestability can be reconciled with sunk costs. When average total costs are constant over a range of output, marginal cost pricing does not conflict with the budget constraint faced by firms. Empirical observations support the notion of constant...

In this paper the effects of different institutional scenarios on rent creation and rent distribution in a labour market are studied. Rent is generated by sinking costs in human capital investment and this rent is distributed between firms and workers by the wage set. In the bench-mark scenario...