Barriers to entry are important in the study of all industrial structures. Since our understanding of how a monopolist would respond to a change in demand or costs relied on the idea that barriers to entry are sufficiently high to prevent entry we study them in some detail here.

    A number of things can act as effective barriers to entry, some more effective than others. The more effective a barrier is, the more it costs to cross it or to enter the industry. In other words, barriers to entry are just high entry costs. (In some cases they may be legal restrictions, we can think of these as very high, perhaps almost infinitely high costs of entry).

    Some barriers to entry may simply exist due to historical accident, but most are created by the firm itself. In addition to exploring barriers, we wish to investigate how firms might respond to a fear that existing barriers are inadequate.

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