Contestibility Flashcards
1
Q
What is contestibility
A
Threat of competition
2
Q
What is hit and run competition
A
When profit seekers enter and exit a market quickly to make supernormal profit
3
Q
Contest able market characteristics
A
Low sunk costs
Low barriers to entry
Low brand loyalty
4
Q
Contestability (E)
A
Allocative efficiency
Productive efficiency
X- efficiency
Lower prices through predatory pricing
5
Q
Contestability cons
A
Low dynamic effeciency
Anti competitve strategies- pred pricing
Cost cutting in dangerous areas - health and safety
6
Q
Contestability cons
A
Low dynamic effeciency
Anti competitve strategies- pred pricing
Cost cutting in dangerous areas - health and safety
7
Q
Contestable markets on diagram
A
Will always push a firm to be allocatively and productively efficient
Produce where ac = ar
