Contestable Markets

Contestable Markets

1. An entrant has access to production techniques, advertising to customers and entry decisions can be reversed

2. Low barriers to entry and exit

   • The more contestable the market the lower the barries
   • The less contestable the market the higher the barriers to entry i.e imperfect competition

3. Pure market contestability

   • Perfect information
   • Freeedom to markets
   • Abscence of sunk costs

4. Sunk costs

   • These are costs that have been commited by a business and cannot be recovered once a firm has entered that industry

5. Why markets are becoming more contestable?

   • Entrepreneurial zeal
   • De-regulation of markets