Contestable markets are based on three assumptions: entry is free and costless, new firms can enter with no price reaction and exit is free and costless.

Name: Contestable markets are based on three assumptions: entry is free and costless, new firms can enter with no price reaction and exit is free and costless.
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This is the definition and key assumptions of contestable markets, which assume that there are no barriers to entry or exit and that new firms can enter without affecting prices in the market.

Contestable Markets Are Based on Three Assumptions: Entry Is Free