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Barriers to Entry

ISSUES IN COMPETITION LAW AND POLICY, Vol. 1, p. 601, 2008

17 Pages Posted: 1 Jan 2010  

Dennis W. Carlton

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

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Date Written: 2008

Abstract

This chapter analyzes the concept of barriers to entry. It explains that the concept is a static one and explores the inadequacy of the concept in a world with sunk costs, adjustment costs, and uncertainty. The static concept addresses the question of whether profits are excessive. The more interesting and relevant questions are how fast entry or exit will erode profits or losses, and how do the bounds that entry and exit place on price vary with uncertainty and sunk cost. Intuition based on the static concept of barrier to entry can be misleading in many industries.

Suggested Citation

Carlton , Dennis W., Barriers to Entry (2008). ISSUES IN COMPETITION LAW AND POLICY, Vol. 1, p. 601, 2008 . Available at SSRN: https://ssrn.com/abstract=1529799

Dennis W. Carlton (Contact Author)

University of Chicago - Booth School of Business ( email )

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National Bureau of Economic Research (NBER)

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