3.10 How does the threat of competition affect a firm’s behavior?

Wednesday, May 22, 2013

What students need to learn:

Students should be able to:
Additional Guidance Notes
Define contestability and understand how the threat of new entry may influence
behaviour and market performance of existing firms.
Students should be able to understand the relationship between sunk costs and the degree of contestability — examples may include banking, airline industry and petrol retailing.
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