Final answer:
The fractional ownership jet taxi industry is a contestable market because aircraft are redeployable assets and even dominant firms rely on brand-name recognition to compete. The correct answer is B.
Step-by-step explanation:
A contestable market is a market in which there are low barriers to entry, allowing new firms to enter and compete with existing firms. In the case of the fractional ownership jet taxi industry, there are two observations that support the claim that it is a contestable market:
Aircraft are redeployable assets: This means that the companies in this industry can easily move their aircraft between different locations and routes based on demand. This flexibility makes it easier for new firms to enter the market and offer their services.
Dominant firms enjoy strong brand-name recognition: While this observation may seem to contradict the idea of a contestable market, it actually supports it. In a contestable market, even dominant firms are not protected from competition. The fact that these firms rely on their brand-name recognition to compete shows that they do not have complete control over the market.
Redeployable assets like aircraft support the contestability of the fractional ownership jet taxi market because they facilitate easy market entry and exit, a key characteristic of contestable markets.
The observation that aircraft are redeployable assets supports the claim that the fractional ownership jet taxi industry is a contestable market. In a contestable market, there are no significant barriers to entry or exit, meaning new competitors can easily enter the market if they can obtain the necessary capital assets, such as aircraft. Because aircraft can be redeployed to different routes or services, this reduces the risk for new entrants, as they do not have to commit to a fixed location or service. Therefore, the ability to redeploy assets makes it easier for new entrants to challenge existing firms, increasing the contestability of the market.
On the other hand, the observation that dominant firms enjoy strong brand-name recognition does not support a contestable market. Strong brand recognition can serve as a barrier to entry because new entrants may struggle to attract customers away from established brands.