Contestable Markets

Text : Contestable Markets

a recent idea in microeconomics is that even when only one firm is in a market, that firm can act as if it were competitive. In this view ,competition among firm within a market is less important than the competition for a market. Even if the market is so small that only one firm can operate profitably in it, there may be substantial competition to determine which firm will enter the market, and what price that firm will charge. In contestable market , new firm may enter the market under essentially the same cost conditions as a firm that is already in the market. A firm can also exit the market without losing any investment in capital that is specific to that market and valueless elsewhere.

Most markets in which there is a monopoly are not contestable, however , because the incumbent firm does have sunk costs. Then , the incumbent has a competitive advantage over any prospective newcomer to the business and, as a result, can charge a price higher than marginal cost.

For instance, suppose that a firm has a local monopoly over cable television. It is economical for one firm to provide cable service because laying cable and providing individual hookups to cable subscribers involve substantial economies of scale. But the market is not fully contestable because some of the costs incurred by the cable company are sunk costs, which cannot be transferred if the company were to move its business elsewhere. The cable itself can be re-utilized, but much of the labor involved in moving it would be wasted, and some of the cable and other materials associated with the hookups in each house would be valueless if the company had to exit the business. Because some of the investment is sunk, a new firm competing for the business would have to bid high enough to cover all its costs, whereas the incumbent firm could set a slightly lower price and make a substantial profit above and beyond its variable costs.

This discussion should make it clear that firm may behave competitively in many situations. Unfortunately, no simple indicator signifies when market approximates perfect competition. often it is necessary to analyze the number and size of firms and their strategic interactions.

Texte : Des Marchés Contestables

Une idée récente dans la microéconomie est-ce même quand seulement une société est à un marché, cette société peuvent agir comme si c'était compétitif. Dans cette vue, compétition(concurrence) parmi la société dans un marché est moins importante que la compétition(concurrence) pour un marché. Même si le marché est si petit que seule une société peut y opérer(fonctionner) profitablement, il peut y avoir la compétition(concurrence) substantielle pour déterminer que la société entrera dans le marché et quel prix que la société facturera(chargera). Dans la société du marché, nouvelle contestable peut entrer dans le marché dans essentiellement les mêmes conditions de coût qu'une société qui est déjà au marché. Une société peut aussi quitter le marché sans perdre n'importe quel investissement dans le capital(la capitale) qui est spécifique à ce marché et sans valeur ailleurs.

La plupart des marchés dans lesquels il y a un monopole ne sont pas contestables, cependant, parce que la société en exercice a vraiment des coûts coulés. Alors, le

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