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Contestable Markets Consider the comparative contestability of the markets for designer footwear and computer printer ink cartridges. A market is perfectly contestable when the costs of entry and exit by potential rivals are zero, and when such entry can be made very rapidly. A contestable market is one which is open to potential competition from new firms which have low or zero entry and exit barriers. These exit and entry barriers include capital costs, transferability of capital equipment, economies of scale, branding/advertising and imports that are feasible. The designer footwear market can be defined as the market of 'exclusively priced, high quality designer shoes'. Designers in the market usually produce shoes on a very small scale, at a high price and high quality and examples include Gucci, Armani and Burberry. The initial capital costs of producing designer footwear are relatively low in terms of economic scale. Capital costs will include raw materials and...

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