Barriers to entry

In the theory of contest in the field of economics, barriers to presentation refer to the obstacles that a firm faces in entering a trusted grocery. Barriers to entry are made to block future competitors from entering a market valuably. These are designed to protect or secure the monopoly power of the present and existing firms in a market hence maintaining monopoly gains or profits in the long run.Barriers to entry are an incumbent firms source of pricing power since it gives a firm such capability to raise or increase their prices without losing their customers. in that respect are many forms of barriers to entry into market. One of the more known and important barriers to entry are government regulations. Through such regulations entry in aces market may be more difficult 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, licen ses or tariffs that in turn raises the coronation required in entering a market thus establishing an efficient barrier to entry. Another type of barrier to entry is marketing or advertising. By spending greatly on advertising that new firms find difficult to do, present or incumbent firms, make it hard for new entrants to penetrate the market. drop 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, sunk costs establish the risk and discourage entry for new firms. Research and development can also be a barrier to entry in a market. warm 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 giving them edge and structural advantage over prospective competitors. Barriers to entry indeed limit competition in an industry or market.There are several more barriers to entry such as control of resources, allocator 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 Applied Economics). New York Routledge, 1990. Print.