In a contestable market there does not always need to be actual competition to keep prices relatively low - just the threat of competitors entering the market.

Question

Quizplus · Accepted Answer

This is the essence of the contestability theory, which suggests that even if there are only a small number of firms operating in a market, if there are low barriers to entry and exit, and if there is a credible threat of potential competitors, this can keep prices low. The fear of losing market share to new entrants can motivate existing firms to keep prices competitive.

In a Contestable Market There Does Not Always Need to Be