Barriers to entry are designed to block potential entrants from entering a market profitably.
Barriers to entry seek to protect the power of existing firms and maintain supernormal profits and increase producer surplus.
Barriers make a market less contestable - they determine the extent to which well-established firms can price above marginal and average cost in the long run.
George Stigler defined an entry barrier as “A cost of producing which must be borne by a firm which seeks to enter an industry but is not borne by businesses already in the industry".
George Bain defined entry barriers as “The extent to which established firms elevate their selling prices above average cost without inducing rivals to enter an industry".
Cost advantages and entry barriers
Structural, Strategic and Statutory Entry Barriers
Theory of Early Mover or First Mover Advantage
Sometimes there are sizeable advantages to being first into a market – first-movers can establish themselves, build a customer base and make life difficult for firms who arrive later on the scene.
First mover advantage can prove to be only a temporary benefit to businesses that are first to gain commercially from a new market opportunity