The "contestable market" argument holds that inter-industry competition between giant firms in related, but not identical markets, does not limit the price-making power of large firms.

Question

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The "contestable market" theory suggests that the threat of potential entry by new competitors can limit the price-making power of large firms, even in the absence of actual entry, because these firms must price competitively to deter new entrants.

The "Contestable Market" Argument Holds That Inter-Industry Competition Between Giant