Last Sunday the sun was out and the children's playground was full of kids and their families. As usual the ice cream van was nearby with a steady stream of willing customers. Then something unexpected happening - another ice cream van turned into the car park. What would happen? Well, the driver saw he was not alone, turned around and left. So, we missed out on any particular excitement. Even so, this brief encounter is a nice illustration of the concept of contestable markets. The standard textbook typically associates the extent of competition with the number of firms in the market. A monopoly has one firm and perfect competition has a large number of firms. Simple enough. But, also misleading, bordering on plain wrong. It is more accurate to measure competition, not by the number of firms, but by the restrictions on entry to the market and the standardization of goods in the market. To illustrate the issues consider our ice cream van. Suppose the local council ha
Some random thoughts on game theory, behavioural economics, and human behaviour