Definition

Barrier to Entry

There are a number of ways that firms in an industry can keep the number of new entrants low. These techniques are referred to as barriers to entry. A barrier to entry is a condition that creates a disincentive way for a new firm to enter an industry. The six major sources or barriers to entry:

  • Economies of scale,
  • Product differentiation,
  • Capital requirements,
  • Cost advantages independent of size,
  • Access to distribution channels, and
  • Government and legal barriers.
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