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Contestable Markets Theory ­ Proposed byWilliam Baumol

What is a contestable market?
A contestable market is one in which there is always the threat of entry of potential rivals as a
result of low barriers to exit and entry.

The market usually contains one firm or a small number of…

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Contestability and Public Interest:

Is a market is contestable it can be said to operate competitively and so consumers benefit from
It is important to remember that the degree of contestability should be considered instead of
just market share.

Advantages Disadvantages
Firms may deliberately limit profits to
Incentive for…


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