In the past, the Department of Transportation allowed airline mergers that gave the merged airlines market shares of 79 and 82 percent, respectively, in their hub cities.The concept the dot used to allow mergers where there was obvious concentration was most likely
A)the good trust principle.
B)contestability.
C)the efficient market principle.
D)the monopolistic competition principle.

Question

Quizplus · Accepted Answer

The concept of "contestability" refers to a situation where a market is accessible to potential entrants despite the presence of one or more dominant firms, implying that the threat of potential competition can discipline the market behavior of the incumbents. This concept could justify allowing mergers that result in high market shares if the market remains open to competition and new entrants can challenge the dominant position of the merged entities.

In the Past, the Department of Transportation Allowed Airline Mergers