61-MonopolyEntryBarriers

61-MonopolyEntryBarriers - Monopoly and Barriers to Entry...

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Monopoly and Barriers to Entry
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Long Run: Barriers to Entry Barriers to entry are designed to block potential entrants from entering a market profitably They seek to protect the monopoly power of existing firms and therefore maintain supernormal profits in the long run Barriers to entry make a market less contestable i.e. they affect market structure in the long run
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Types of Entry Barrier (1) (1) Structural barriers (or Innocent Barriers) – due to differences in production costs and being in the market for some time Economies of scale (e.g. Natural monopoly) Vertical integration (e.g. Backwards and forwards) Control of essential resources e.g. technologies / commodities Expertise and reputation of the incumbent Brand loyalty Inherent suspicion among consumers about new ideas (2) Strategic barriers Predatory pricing / limit pricing Marketing / product differentiation
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Types of Entry Barrier (2) (3) Statutory (legal) barriers - entry barriers given force of law
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61-MonopolyEntryBarriers - Monopoly and Barriers to Entry...

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