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Output and pricing performance of firms

Contestable markets theory recommends that even though an industry has only one producer, in that case the output and pricing performance of which firm will resemble which of a competitive industry as long like: (1) there are numerous active buyers in the market. (2) the firm’s output is homogeneous. (3) entry and exit are relatively costless in the long run. (4) the firm feels threatened by the possibility of antitrust action. (5) barriers to entry are ensured by the government.

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