Network industries that are contestable usually perform better than uncontestable markets even if they are monopolized.

Question

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Contestability refers to the ease with which new competitors can enter a market and challenge the existing firms. In a contestable market, even if there is a monopoly, the threat of entry by new firms can incentivize the monopolist to keep prices low and quality high to prevent losing customers to potential competitors. This leads to a more efficient allocation of resources and better outcomes for consumers compared to uncontestable markets. Therefore, network industries that are contestable are likely to perform better, even if they are monopolized.

Network Industries That Are Contestable Usually Perform Better Than Uncontestable