Barriers to entry

Updated: Aug 20, 2021

Laws, institutions, or practices which make it difficult or impossible for new firms to enter some markets, or new workers to compete for certain forms of employment. Barriers to entry may take various forms. The law may confer monopoly rights on existing firms, or impose qualifications for licences for new operators which are so obstructively administered as to make new entry difficult Existing firms may have monopoly control over essential inputs, sites, or technical know-how, protected by patents or commercial secrecy. If the capital required for new plants is very large, this restricts the number of possible entrants. The fear of price wars by existing firms may deter some new firms from trying to enter an industry. In some markets, sheer gangsterism is used to discourage entry. Barriers to entry are often higher against foreign firms or individuals than against nationals: the European Union tries to prevent this so far as EU residents are concerned, with varying success.

Reference: Oxford Press Dictonary of Economics, 5th edt.

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James Knight
Editor of Education
James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.