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Barriers to Entry

32 Pages Posted: 30 Nov 2005  

Dennis W. Carlton

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

Multiple version iconThere are 2 versions of this paper

Date Written: October 2005

Abstract

This paper 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 question is 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.

JEL Classification: L1, L4

Suggested Citation

Carlton , Dennis W., Barriers to Entry (October 2005). NBER Working Paper No. W11645. Available at SSRN: https://ssrn.com/abstract=819805

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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