A contestable market is one in which the following conditions are satisfied:
a) there are no barriers to entry or exit;
b) all firms, both incumbent and potential entrants, have access to the same production technology;
c) there is perfect information on prices, available to all consumers and firms;
d) entrants can enter and exit before incumbents can adjust prices.
In contrast to perfect competition, a contestable market may have any number of firms (including only one or a few) and these firms need not be price-takers. The analysis of contestable markets is designed for cases in which the existence of scale economies precludes a large number of competitors.