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The final and most competitive model is that of a perfectly contestable market. A contestable market looks like a monopoly or oligopoly but, in fact, is much more competitive. Perfectly contestable markets allow for easy entry and exit. How could a market that allows easy entry and exit have only one or two firms in it? If a market is making zero profit, no firms will enter it, regardless of whether there are 1 or 1 million firms already in the market. Take, for example, the air route between Cincinnati, Ohio, and Lexington, Kentucky. Assume that Delta/Conair is the only airline that flies this route. This does not mean that Delta is making monopoly profits, since it is relatively easy for another airline to fly that route. Delta may choose to charge the perfectly competitive price in order to keep other airlines from entering the market. Why would Delta want to make zero profit? First of all, zero profit, remember, is not a bad thing. Secondly, since people tend to have strong airline affiliations, due to frequent flier accounts, once Delta has a flier on one flight, they can count on that person to fly many other flights that may be more profitable. Summary Overall, this has been a brief examination of the six different models of oligopoly. Each offers insights into how specific types of markets behave.
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