Why intervene?
As previous chapters have indicated, large firms can often achieve economies of scale
which may benefit the consumer in the form of reduced prices. At the same time, scale
economies represent an important barrier to entry which can restrict competition in a
market, thereby helping to reduce consumer choice, and, in some cases, allowing firms
to make abnormal profits. To proponents of the idea of ‘contestable markets’, it is entry
barriers rather than market structure which are the key to consumer exploitation and
this provides a rationale for government intervention to promote greater competition. A
contrary view is that there is little, if any