Barriers to Entry
The precise definition of barriers to entry is controversial; different versions have been proposed over the years. The issue is not one of pure semantics, since evidence of barriers to entry plays an important role in merger review and other areas of antitrust policy. One definition that seems to reflect current thought and practice is as follows: barriers to entry are structural, institutional and behavioural conditions that allow established firms to earn economic profits for a significant length of time.
KeywordsAbsolute cost advantage Antitrust Asymmetric information Barriers to entry Collusion Contracts as barriers to entry Excess capacity Game theory Limit pricing Merger analysis Oligopolistic competition Patents Predatory pricing Product differentiation Scale economies Sunk costs
- Baumol, W., J. Panzar, and R. Willig. 1982. Contestable markets and the theory of industry structure. New York: Harcourt Brace Jovanovitch.Google Scholar
- Demsetz, H. 1982. Barriers to entry. American Economic Review 72: 47–57.Google Scholar
- Federal Trade Commission and U.S. Department of Justice. 2000. Antitrust guidelines for collaborations among competitors. Online. Available at http://www.ftc.gov/os/2000/04/ftcdojguidelines.pdf. Accessed 18 Jan 2007.
- Gilbert, R. 1989. Mobility barriers and the value of incumbency. In Handbook of industrial organization, ed. R. Schmalensee and R. Willig. Amsterdam: North-Holland.Google Scholar
- Stigler, G.J. 1968. The organization of industry. Homewood: Richard D. Irwin.Google Scholar
- Sutton, J. 1991. Sunk costs and market structure. Cambridge, MA: MIT Press.Google Scholar