Two barriers to entry over which a firm may exert some control are excess capacity and advertising expenditure. Investment in excess capacity indicates to a potential rival that entry will likely be met with increased output and lower prices. Increases in advertising expenditure force new entrants to spend large amounts on advertising as well. Since the recovery value of a failed advertising campaign is zero, this is one of the riskiest of all start up costs.

© 1995-1999 EconWeb - All Rights Reserved