Editing Barriers to entry (section)

==Market structure==
A '''structural''' barrier to entry is a cost incurred by new entrants to a market that is caused by inherent industry conditions, such as upfront capital investment, economies of scale and network effects.<ref name= "west-oecd"/> For example, the cost to develop a factory and obtain the initial capital required for manufacturing can be seen as a structural barrier to entry.

A '''strategic''' barrier to entry is a cost incurred by new entrants that is artificially created or enhanced by existing firms.<ref name= "west-oecd"/> This could take the form of exclusive contracts, whether supply or demand-side, or through price manipulation in non-competitive markets.

A market with [[perfect competition]] features zero barriers to entry.<ref name= "PerfectCompetitionHistoricallyContemplated">{{Cite journal|last=Stigler|first=George|author-link=George Stigler|date=February 1957|title=Perfect Competition, Historically Contemplated|journal=[[Journal of Political Economy]]|volume=65|pages=1–17|doi=10.1086/257878|s2cid=153919760}}</ref> Under perfect competition firms are unable to control prices, and produce similar or identical goods.<ref name= "PrinciplesOfMicroeconomics">{{Cite book|last1=Curtis|first1=Doug|last2=Irvine|first2=Ian|title=Principles of Microeconomics|url=https://openlibrary-repo.ecampusontario.ca/jspui/bitstream/123456789/294/11/PrinciplesMicroeconomics-2020A.pdf|access-date=2022-04-20|publisher=[[Lyryx Learning]]|date=2020|orig-date=Originally published 2017}}</ref> This means that firms cannot operate strategic barriers to entry. 
Perfect competition implies no [[economies of scale]];<ref name="PrinciplesOfMicroeconomics" /> this means that structural barriers to entry are also not possible under perfect competition.

[[Monopolistic competition]] can allow for medium barriers to entry. Because the enterprises can earn their short-term revenue through innovation and marketing new products to push the price higher than average costs and marginal costs, barriers to entry can be made higher.<ref>{{Cite journal|title=Measuring the Benefits to Advertising under Monopolistic Competition|date=April 2012|doi=10.22004/ag.econ.122308|doi-access=free|last1=Boland|first1=Michael A.|last2=Crespi|first2=John M.|last3=Silva|first3=Jena|last4=Xia|first4=Tian|journal=Journal of Agricultural and Resource Economics|volume=37|number=1|pages=144–155}}</ref> However, due to the low cost of the information in monopolistic competition, the barrier of entry is lower than in oligopolies or monopolies as new entrants come.<ref>{{Cite journal|last=Todorova|first=Tamara|year=2021|title=Some Efficiency Aspects of Monopolistic Competition: Innovation, Variety and Transaction Costs|journal=Theoretical and Practical Research in Economic Fields |publisher=ASERS Publishing|volume=12|issue=24|pages=82–88|doi=10.14505/tpref.v12.2(24).02 |s2cid=157645529 |url=https://mpra.ub.uni-muenchen.de/109919/1/MPRA_paper_109919.pdf|access-date=January 24, 2023}}</ref>

An [[Oligopoly]] will typically see high barriers to entry, due to the size of the existing enterprises and the competitive advantages gained from that size. These competitive advantages could arise from economies of scale, but are also commonly associated with the excess capacity of capital held by incumbent firms,<ref name= "ExcessCapacityAsABarrierToEntry">{{Cite journal|last=Lieberman|first=Marvin|date=June 1987|title=Excess Capacity as a Barrier to Entry: An Empirical Appraisal|journal=The Empirical Renaissance in Industrial Economics|publisher=[[Wiley (publisher)|Wiley]]|volume=35|number=4|pages=607–627|doi=10.2307/2098590|jstor=2098590}}</ref> which allows them to engage in temporarily loss-inducing behaviour to force any potential competitor out of the market.<ref name= "HowCartelsPunish">{{Cite journal|last=Ayres|first=Ian|date=March 1987|title=How Cartels Punish: A Structural Theory of Self-Enforcing Collusion|journal=[[Columbia Law Review]]|volume=87|issue=2|pages=295–325|doi=10.2307/1122562|jstor=1122562|url=https://digitalcommons.law.yale.edu/fss_papers/1549 }}</ref>

The distinguishing characteristic of a [[duopoly]] is a market featuring solely two firms. Competition in a duopoly can vary due to what is being set in the market: price or quantity (see [[Cournot competition]] and [[Bertrand competition]]). It is generally agreed that a duopoly will feature higher barriers to entry than an oligopoly, as firms within a duopoly have a greater potential for absolute advantage with respect to demand.<ref name= "AModelOfDuopoly">{{Cite journal|last=Dixit|first=Avinash|date=Spring 1979|title=A Model of Duopoly Suggesting a Theory of Entry Barriers|journal=The Bell Journal of Economics|volume=10|issue=1|pages=20–32|doi=10.2307/3003317|jstor=3003317|url=http://ageconsearch.umn.edu/record/269023 }}</ref>

A market with a [[monopolistic]] firm will often have very high to absolute barriers to entry. The incumbent firm can obtain tremendous profits through a pure monopoly market, therefore there are very large incentives for the creation of strategic barriers, as they want to continue to earn excess profits in the short and long term.<ref name="IsSettingUpBarriers">{{Cite journal|last1=Dilek|first1=Serkan|last2=Top|first2=Seyfi|date=October 2012|title=Is Setting up Barriers to Entry Always Profitable for Incumbent Firms?|journal=[[Procedia|Procedia - Social and Behavioral Sciences]]|series=8th International Strategic Management Conference|publisher=[[Elsevier]]|volume=58|pages=774–782|doi=10.1016/j.sbspro.2012.09.1055|doi-access=free|issn=1877-0428}}</ref> These barriers can take several forms, including cost advantage, [[advertising]], and strategic reaction in the form of temporary deviation from equilibrium behaviour.<ref name="IsSettingUpBarriers" />