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In trade economics, a '''barrier to entry''' is an obstacle to a firm entering a [[market]]. Almost all markets have some barriers to entry, as entering a market will usually involve raising capital to buy premises, and advertising to help establish a customer base. However, this will vary considerably between different markets. For example, launching a new mass market car is likely to be much more costly than starting a new shop, as the former will require a large amount of research and development, as well as the cost of setting up a production line, and the necessary advertising.     

In trade economics, a '''barrier to entry''' is an obstacle to a firm entering a [[market]]. Almost all markets have some barriers to entry, as entering a market will usually involve raising [[capital]] to purchase [[factors of production]], and advertising to help establish a customer base. However, this will vary considerably between different markets. For example, launching a new mass market car is likely to be much more costly than opening a new shop, as the former will require a large amount of research and development, as well as the cost of setting up a production line, and the necessary advertising.     

Generally, barriers to entry put new entrants to a market at a disadvantage, compared to establish firms. The new entrant to the market may have to invest a large amount of money before it begins to make a profit. It may be doubtful if this can be recouped.  

Generally, barriers to entry put new entrants to a market at a disadvantage, compared to established firms. The new entrant to the market may have to invest a large amount of money before it begins to earn a [[profit]]. It may be doubtful if this can be recouped.  

There are a number of potential barriers to entry:

There are a number of potential barriers to entry:

*Some products may require other firms to produce [[Complementary goods]], in order for the product to be useful. For example, a new format for storing movies (such as [[blu-ray]], or [[DVD]]), is unlikely to be successful without a significant number of movies being available in that format.   

*Some products may require other firms to produce [[Complementary goods]], in order for the product to be useful. For example, a new format for storing movies (such as [[blu-ray]], or [[DVD]]), is unlikely to be successful without a significant number of movies being available in that format.   

 

[[Category:Economics]]

[[Category:Economics]]