Barrier To Entry

A barrier to entry is an obstacle that prevents new competitors from entering a market. Barriers to entry can take many different forms, such as high start-up costs, exclusive contracts, government regulation, and patented technology.

High start-up costs are a common barrier to entry. For example, it can cost millions of dollars to build a factory or develop a new product. This gives existing firms a significant advantage over potential new entrants.

Exclusive contracts are another common barrier to entry. For example, an airline may have an exclusive contract with an airport that prevents other airlines from using that airport. This makes it very difficult for new airlines to enter the market.

Government regulation can also be a barrier to entry. For example, there may be regulations that require potential entrants to obtain a license in order to operate. This can make it very difficult and costly for new firms to enter the market.

Patented technology can also be a barrier to entry. For example, if a firm has developed a new and innovative technology that is protected by patents, this can make it very difficult for other firms to enter the market and compete against the patent holder.