Barriers to Entry

An economics and business term, barriers to entry is based on the theory of competition in which the tendency of competitors in the market is to limit competition in an effort to raise profits to a maximum. The first thorough study of the nature and extent of barriers to entry was conducted by Joe S. Bain in his 1956 book titled Barriers to New Competition, in which he defined an entry barrier as the set of technology or product conditions that allows incumbent firms to earn economic profits in the long run. Bain identifies three sets of conditions in which barriers to entry are evident: economies of scale, product differentiation, and absolute cost advantages. Since Bain's 1956 definition, barriers to entry have been further expanded ...