Contestable

Contestable 39 Shreenaeconomics Is the airline grocery contestable? Definition Of contestability when in that location ar none or low barriers to entry for incumbent incorruptibles Where they leave be forced to keep prices competitive and profits low in the long term. Otherwise this Will encourage Other firms to enter into the market. at that place are roughly 20 airline companies based in the 0K market It iS a form Of an oligopolistic market and price is not al shipway the determinant of shoot but non price factors such as Inflight work and atmosphere. Is contestable not contestable Low cost airlines as thither are put down barriers to entry and exit as you can lease airplanes and master the go by up cost. There are also no sunk costs If leased airplanes.This means that capital wont be lost when exiting the market High barriers to entry In terms of sunk costs and Infrastructural costs. Providing services costs a lot ot money (le first class cabins) There Is competition be tween companies so parvenu tirms can enter and actualize regulation profits There are dominant tirms in the market, there leave alone be brand loyalty which reduces contestability as new firms will have to compete on onprlce factors to gain loyal customers and to compete with different firms. an example being british airways and virgin BA has a root quiet in air craft experience and Virgin airlines cracking a lively talk promoting atmosphere where even the airhostesses try and bump conversations going) Access to the same level of technology. this means that the costs each firm take on from technological aspects such as inflight services and ways of booking are the same so it doesnt stop competition as there is no LISPS.The forgedger firms can exploit economies of scale as they produce at lower average unit cost compared to new firms entering the market which do not have perfect nurture about cheap suppliers or bulk buy to get big discounts, the low cost airline market is m ore contestable than normal airlines use of the Internet to reduce distribution Costs Maximise the use Of the aircraft assets Direct sell only Via the net Ticketless travel NO destitute airline food one kind of aircraft commonality maxmlses efficiency in the recruitment and training of staff Predatory pricing can extend In the short which can drive away new firms, they reduce heir profits below average costs and cover with saved revenues till the new firms cannot make any profit and they exit the market.