Barriers to entry

In the theory of competition in the field of economics, parapets to founding refer to the obstacles that a solid faces in entering a certain food market. Barriers to entry be made to block prospective competitors from entering a market valuably. These argon designed to protect or secure the monopoly power of the present and animated firms in a market therefore maintaining monopoly gains or profits in the long run.Barriers to entry atomic number 18 an incumbent firms ascendent of pricing power since it gives a firm such capability to put or increase their prices without losing their customers. There be many forms of barriers to entry into market. star of the more known and important barriers to entry argon government regulations. by dint of such regulations entry in ones market may be more trying or even impossible. There are other extreme cases where the government make competition unlawful hence creating a statutory monopoly in the country.This type of barrier can be in the form of permits, licenses or tariffs that in turn raises the investment infallible in entering a market thus establishing an efficient barrier to entry. Another type of barrier to entry is marketing or advertising. By spending capitally on advertising that new firms find difficult to do, present or incumbent firms, make it hard for new entrants to diffuse the market. Sunk cost, is another form of barrier to entry. Sunk costs are costs that a firm cannot recover once it decides to leave the industry.In turn, sink costs strengthen the risk and discourage entry for new firms. investigate and development can also be a barrier to entry in a market. Strong spending by one firm on its research and development can be a great restriction to potential competitors to a certain industry. Concentrated research by incumbent firms makes them more competitive in the industry thus magnanimous them edge and structural advantage over prospective competitors. Barriers to entry thus limit c ompetition in an industry or market.There are several(prenominal) more barriers to entry such as control of resources, distributor agreements, and economy of scale, investment, intellectual property, supplier agreements, predatory pricing, and a lot more. All of these are hindrances that new firms may encounter when trying to penetrate a market or industry. Works Cited Geroski, Paul. Barriers to Entry and Strategic Competition (Fundamentals of Pure and utilise Economics). New York Routledge, 1990. Print.