In _____ market, the incumbent's profits are often lower in the short run but are worth it in the long run because the firm priced low to deter entry.

Question

Quizplus · Accepted Answer

In a contestable market, incumbents set prices low to deter entry, accepting lower short-run profits for the benefit of long-term market control. This strategy is not about immediate gains but about maintaining a competitive edge and discouraging potential competitors from entering the market.

In _____ Market, the Incumbent's Profits Are Often Lower in the Short