Contestability Flashcards
1
Q
Contestability
A
Freedom of firms to enter and leave a market without cost
2
Q
(3) Perfectly contestable market
A
EOS to all therefore no natural Mon/oligopoly
No sunk costs or contractual agreements
Perfect information
3
Q
2 Benefits
A
Incumbent firms remain highly competitive in fear of entrants
Retention of high market concentration benefits
4
Q
2 Negative
A
Susceptible to hit and run when making SNP which means no R+D
Loss of monopoly
5
Q
2 UK regulators
A
CMA and OFT
6
Q
Success story
A
End of Royal Mail monopoly allow for higher efficiency
