1 / 14

In a contestable market there are no structural barriers to the entry of firms in the long-run.

In a contestable market there are no structural barriers to the entry of firms in the long-run. If existing businesses are enjoying high economic profits, there is an incentive for new firms to enter the industry.

donny
Download Presentation

In a contestable market there are no structural barriers to the entry of firms in the long-run.

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. In a contestable market there are no structural barriers to the entry of firms in the long-run. • If existing businesses are enjoying high economic profits, there is an incentive for new firms to enter the industry. • This increases market competition and dilutes monopoly profits for the incumbent firms

  2. ‘Hit and Run’ tactics – enter the industry, take the profit and get out quickly (possible because of the freedom of entry and exit)

  3. other examples of markets exhibiting contestability characteristics: • Financial services • Computer industry – ISPs, software, web development • Energy supplies

More Related