Airline Industry and Contestability Project What is a...

Airline Industry and Contestability Project What is a contestable market? In a contestable market, there are one or a number of firms which profit maximise. In other words the number of firms is irrelevant. The key assumption to make here is that barriers to entry to the industry are relatively low, as is the cost to exit the industry. The existence of potential entrants into the industry will tend to keep profits to their normal level even in the short run, because existing firms will want to deter new entrants from coming into the market. Contestable markets are both productively and allocatively efficient and are likely to be efficient in the short run as well. The theory regarding the type of profit made in a contestable†¦show more content†¦If a firm didnt operate at this level then a new entrant would be able to establish itself, producing at the bottom of its average cost curve. Hence, firms in the long run in a contestable must be productively efficient. Contestable markets are different from perfectly competitive markets. It is possible for one incumbent firm to dominate the industry, i.e. a monopoly. Each existing firm in the market can does produce a differentiated product. Therefore there are three conditions for contestability: -  · Perfect information and the ability/right to use the best available technology.  · Freedom to market/ advertise and enter a market  · The absence of sunk costs. To what extent is the airline industry an example of a Contestable market? The airline industry is very competitive and dynamic; the performance of the industry depends on how well the European economy is performing. The rise in major airliners over the last decade suggests that more firms have entered the market and made it more contestable. If you look in the past national flagships such as British Airways and Air France dominated the airline industry. These were state owned and owned by the government. These airliners accounted for 70% of the civilian passengers. This monopoly has recently been eroded when the airline industry was left to the free market forces. This means there is more pressure for airlinersShow MoreRelatedPrice Makers and Price Takers952 Words   |  4 PagesMarket Structure o Perfect (pure) competition Price–taking firms each with no influence over the ruling market price (see diagram below) Free entry and exist of businesses in the long run – drives down profits towards a normal profit equilibrium level Each supplier produces homogeneous products – each a perfect substitute – hence the perfectly elastic demand curve for the individual supplier Key factor - interdependent nature of pricing decisions between rival firms Each firm must considerRead MoreTeaching Notes Robert Grant - Strategy 4th Edition51665 Words   |  207 PagesSurvival 26 3 The US Airline Industry in 2002 33 4 DaimlerChrysler and the World Automobile Industry 41 5 Wal-Mart Stores Inc., May 2002 49 6 Eastman Kodak: Meeting the Digital Challenge 62 7 Organizational Restructuring within the Royal Dutch/Shell Group 70 8 Harley-Davidson, Inc., January 2001 77 9 Online Broking Strategies: Merrill Lynch, Charles Schwab and E*Trade 83 10 11 12 Emi and the CT Scanner [A] [B] 88 Rivalry in Video Games 98 Birds Eye and the UK Frozen Food Industry 109 1 CONTENTS Read MoreFrauds in Insurance11958 Words   |  48 Pagesfederal subject in India. It is a subject matter of solicitation. The legislations that deal with insurance business in India are Insurance Act, 1938 and Insurance Regulatory amp; Development Authority Act (IRDA), 1999. The hypothesis is that THIS PROJECT SCANS THE RISKY NATURE OF INSURANCE WITH REFERENCE TO VARIOUS TYPES OF TRANSACTIONS AND THEIR VULNERABILITY TO FRAUD. CONCEPT OF INSURANCE Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a