Abstract
Contestable markets are those in which competitive pressures from potential entrants exercise strong constraints on the behaviour of incumbent suppliers. For a market to be contestable, there must be no significant entry barriers. Then, in order to offer no profitable opportunities for additional entry, an equilibrium configuration of the industry must entail no significant excess profits, and must be efficient in its pricing and in its allocation of production among incumbent suppliers. This is so of a contestable market whether it is populated with only a monopolist or with a large number of actively competing firms, because it is potential competition from potential entrants rather than competition among active suppliers that effectively constrains the equilibrium behaviour of the incumbents.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
