Entry Barriers

  • Economists define an entry barrier as something that keeps new firms from entering a market that is generating economic profits.
  • Entry barriers play an important role in market power, thus measuring the height of such barriers is of interest
    • Determine whether potential source of entry barrier is present by evaluating market conditions and production technology

      → Are there patents? Large sunk costs? Limited supply of inputs?

    • Observe entry into markets with excess profits