contestable markets Flashcards
(16 cards)
Allocative efficiency
Achieved in a contestable market if existing firms price at marginal cost
Asymmetric information advantage
When incumbent businesses know more about their industry than potential entrants
Brand loyalty
Consistent preference for one brand over others
Challenger brand
A rival product that seeks to disrupt sales of established products by being innovative or using a different business model
Creative destruction
The upheaval of the established order in the pursuit of innovation
first mover advantage
gains from being early into an industry and achieving economies of scale
Hit and run entry
Where new firms join an industry to cream off some supernormal profits of incumbents and then exit
Market liberalisation
opening up an industry to new competitors
Patent
A legal barrier to contestability that allows a firm to protect intellectual property for some years
Perfectly contestable market
An industry in which entry and exit are costless
Platform business
A business model that creates value by facilitating exchanges between two or more consumers and producers
Process innovation
Change in the way a product or service is conceived, manufactured or distributed
Product innovation
Small, subtle changes to the characteristics and performance of a good or a service
sunk cost
A cost that has been committed and cannot be recovered if a firm leaves a market
Switching costs
Expenses that buyers face if they decide to change suppliers
