Editing Barriers to entry (section)

{{Short description|Economic theory}}
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{{Competition law}}
In theories of [[Competition (economics)|competition]] in [[economics]], a '''barrier to entry''', or an '''economic barrier to entry''', is a [[fixed cost]] that must be incurred by a new entrant, regardless of production or sales activities, into a [[Market (economics)|market]] that incumbents do not have or have not had to incur.<ref name="entryBarriersInEconomicAndAntitrustAnalysis">{{cite journal|url=https://authors.library.caltech.edu/11284/1/MCAaer04.pdf|title=What Is a Barrier to Entry?|access-date=January 24, 2023|last1=McAfee|first1=R. Preston|last2=Mialon|first2=Hugo M.|last3=Williams|first3=Michael A.|journal=[[American Economic Review]]|volume=94|number=2|date=May 2004|pages=461–465|doi=10.1257/0002828041302235|via=[[California Institute of Technology]]}}</ref>
Because barriers to entry protect incumbent firms and restrict competition in a market, they can contribute to distortionary prices and are therefore most important when discussing [[competition law|antitrust]] policy. Barriers to entry often cause or aid the existence of [[monopolies]] and [[Oligopoly|oligopolies]], or give companies [[market power]].
Barriers of entry also have an importance in industries. First of all it is important to identify that some exist naturally, such as [[brand loyalty]].<ref>{{cite web|last=Boyce|first=Paul|title=Barriers to Entry Definition|date=October 25, 2022|url=https://boycewire.com/barriers-to-entry-definition/#The-Importance-of-Barriers-to-Entry|access-date=January 24, 2023|website=Boycewire.com}}</ref>
Governments can also create barriers to entry to meet [[consumer protection]] laws, protecting the public. In other cases it can also be due to inherent scarcity of public resources needed to enter a market.<ref>{{cite web|last=Hayes|first=Adam|title=Barriers to Entry: Understanding What Limits Competition|url=https://www.investopedia.com/terms/b/barrierstoentry.asp|date=December 30, 2022|website=[[Investopedia]]|access-date=January 24, 2023}}</ref>