Competition entry and exit barriers. Entry and exit barriers. Tests. Topic Fundamentals of the theory of market supply and demand The law of demand assumes that

An important characteristic of any market is how variable the number of its participants is, which is determined by the attractiveness of the market and the presence of entry-exit barriers.

Under entry barriers understands the factors that hinder the profitable functioning of new firms in the industry market, i.e. restraining the entry of new members. Exit barriers - these are factors that prevent a firm from leaving the industry market without significant losses; they can also be interpreted as additional restrictions on entry. Entry-exit barriers are an important structural element of any industry market.

One of the classics of the theory of the organization of market structures, J. Bane, proposed a classification of markets depending on the nature of barriers. He highlighted:

free entry markets;
markets with ineffective barriers; in such markets there are certain barriers to entry, but they are short-term in nature, in the long-term, firms can enter the market;
markets with effective barriers; for these markets, the entry of new participants is also difficult in the long run;
markets with blocked entry and exit; such markets are characterized by a stable number of participants.

Real markets mainly belong to the second and third groups of this classification. The existence of barriers to entry and exit directly affects the level and nature of competition in the market. If the barriers to entry are high, firms already in the market may have little to no fear of competition, and as a result the given market becomes a market of imperfect competition. The presence of a barrier to exit from the market leads to the same results. If it is associated with significant costs (for example, the production of a product requires highly specialized equipment with low liquidity), then the probability of new participants entering the market is relatively low. It is the presence of barriers to entry, combined with a high level of concentration of producers in the market, that enables firms to raise prices above marginal costs and receive positive economic profits not only in the short term, but also in the long term. Thus, entry-exit barriers are associated with the notion of market power. Where barriers to entry do not exist or are weak, firms, even with a high degree of concentration, are forced to submit to competitive behavior due to the potential or real threat of invasion by new firms. Empirical data show that firms operating in markets with high barriers to entry and exit have high returns on capital invested, tab. 1.11.

Depending on how the barriers are formed, they are usually divided into two large groups:

1) non-strategic - objectively existing, independent of the decisions and activities of each individual firm;
2) strategic - representing the result of directed decisions of firms operating in the market. The presence of strategic barriers confirms the interest of firms in limiting the access of new potential competitors.

Let's consider each of the groups in more detail.

Table 1.11

Height of Barriers to Entry and Firms' Profitability in US Markets (1950-1960)

Market type	Profitability of participants' activities,%
Markets with high barriers to entry and exit
Automotive industry
Chewing gum production
Manufacturing of cigarettes
Group average
Markets with medium barriers to entry and exit
Soap production
Steel industry
Group average
Markets with low barriers to entry and exit
Glass container production
Shaving accessories production
Group average

Non-strategic barriers include the following.

Demand constraints - market capacity, market saturation with certain goods, the level of the population's ability to pay. Demand characteristics shape market structures and can create barriers to entry into an industry. They are mostly outside the control of firms, but they influence their behavior, primarily by limiting their degree of freedom in setting prices. Market saturation stops new firms from entering it.

The level of concentration is inversely related to the growth rate of demand: the higher the growth rate of demand, i.e. the faster the market expands, the easier it is for new firms to enter. The more firms enter the market, the lower the level of concentration on it will be, and, consequently, the higher the competition.

The price elasticity of demand limits the excess of price over marginal cost available to firms in imperfectly competitive markets. If demand is inelastic, firms can increase price over cost more than under elastic demand. In addition, the lower the elasticity of demand, the easier it is for the dominant firm to simultaneously restrict entry and generate economic profits.

In Russia, barriers of this type are currently not significant for most markets. Some regional examples may be an exception.

Initial investment. Some types of technological processes objectively cannot be implemented without significant initial costs associated with the purchase of equipment and the organization of production.

Cost benefits. Here, the absolute advantages are highlighted, expressed in the fact that the curve of average long-term costs for incumbent firms is always lower than for new market entrants. Relative cost advantages mean that incumbent firms tend to have more output than new entrants and can therefore benefit from economies of scale.

The barriers of this group can be quantified using the barrier index lb, which is calculated as follows.

where VI- the volume of output per person employed at large enterprises;

V2- the volume of output per one employed in small enterprises.

It is essentially a comparison of the labor productivity of market participants of different sizes. In this case, it is assumed that the newly entering firm is an analogue of a small enterprise, and the one already operating on the market is a large one.

The higher the index value, the stronger the barriers to entry for new entrants. Table 1.12 presents quantitative estimates of barriers for some sectors of the Russian economy in the mid-1990s.

As the data in the table show, the level of barriers in industry as a whole at that time was quite high, barriers in the timber and food industries are especially significant, from the point of view of theory, this should be accompanied by a high concentration, at the same time it is not. In the petrochemical and chemical industries, the barriers assessed by this index are low, while these industries are traditionally highly concentrated. This can be explained by the characteristics of the indicator. It is informative only for those markets and industries in which there are significant differences between large and small enterprises. If, due to technological limitations, organizing a small business is difficult, the indicator cannot be used.

Table 1.12

Relative Cost Barrier Index in Russia

A source: calculations of the Institute of Economics and Organization of Industrial Production of the SB RAS.

In modern economic theory, much attention is paid to the concept of information, which is available to various market participants. All other things being equal, the buyer prefers a product whose merits are known to him. One of the most important, although not the only signal about the quality of a product is the reputation (good name) of the company. Building and maintaining a reputation is costly. Reputation can be viewed as a barrier to entry because it enables firms in the industry to exercise market power.

A company entering a new market is faced with the need for significant investments in intangible assets (reputation, established partnerships, etc.). To be successful, the firm must provide the buyer with convincing information that its products are of high quality. To solve this problem, firms use advertising companies, very significant price discounts in the initial period of activity on the market, provide buyers with more reliable and long-term guarantees for the products they sell. All this requires additional costs and creates barriers.

Institutional barriers for market entry and exit may be essential to prevent potential competitors from entering the market. Institutional barriers to entry into the market include the system of licensing the activities of firms, measures of state control over prices and the level of profitability. Government pricing of a product or limiting a firm's profitability can lead to implicit costs, expressed in the loss of part of the potential profit. Institutional barriers to exit include the costs of the firm's owners associated with the termination and bankruptcy procedures. In addition to the above, this group includes regulatory measures on the part of federal and local authorities - quota procedures, land allocation rules, environmental standards, etc. In Russia, these barriers are most significant.

Foreign competition. In an open economy and foreign trade liberalization, foreign competition plays the role of a factor that lowers the level of market concentration, the market power of individual participants, and limits the degree of market imperfection. The height of the entry barriers depends on the rate of import tariffs: the lower the import tariff, the lower the barriers to market entry for a foreign competitor. This type of barrier is run by the government, not by firms, and its height is chosen for reasons of public welfare. Attention should be paid to the specifics of measuring welfare in an open economy: one can measure the welfare of a society on a global scale, or one can be limited by the scale of the national economy. In the latter case, tariffs will have a contradictory effect on the level of welfare.

The nature of the relationship between trade unions and manufacturers. The presence of unions in the industry influences the structure of markets, since unions can redistribute to their members a part of the additional profit received by the manufacturer due to market imperfections by raising wages. Higher wages in sectors where there are unions, compared to sectors where there are no unions, forces firms to raise the prices of their products. Therefore, even if firms do not make additional profits in the market, prices in this industry will be higher than the competitive level. In addition, high wages in the industry discourage increased recruitment of labor, which prevents expansion of production, creating additional barriers to entry for new firms: new firms in industries where trade unions are forced to pay high wages to their workers from the outset.

The state of the market infrastructure. Lack of required engineering, financial and other types of infrastructure can be a significant constraint on the entry of new firms. For many industries, it is important to have the ability to connect to existing power grids, a water supply system, and communications. Such a barrier may be especially relevant for local markets.

The level of criminalization of the economy. The high level of criminalization stops new firms from starting operations; some types of industries are especially vulnerable to such restrictions.

Vertical integration and vertical constraints. Vertical integration assumes that a firm operating in a particular market carries out several relatively autonomous stages of the technological process. An example of vertical integration is an automobile firm that owns a steel mill that serves its steel needs (this is backward integration). Another example is an oil refinery that has a network of petrol stations (forward integration). A vertically integrated firm has additional competitive advantages, since it can lower the price of a product to a greater extent or make a greater profit at a given price due to lower costs either in purchasing factors of production or in selling the final product due to the advantages of integration. Thus, integration makes it possible to obtain additional financial resources, contributes to obtaining market power. If one of the firms operating in the market is the largest owner of the factors of production or sales markets for the final product, it is more difficult for new firms to gain access to this market, since this firm can always refuse to supply resources to the new firm or do it on very unfavorable terms. Therefore, a new firm can enter the market only being vertically integrated itself, which gives rise to the problem of finding additional financial resources, making it difficult to enter.

Diversification of the firm assumes the activity of the firm in the markets of various goods that are not close substitutes. An example of diversified manufacturing is a refrigerator company that simultaneously manufactures cars, trucks, VCRs and has a hotel chain.

Diversification of activities allows the firm to reduce the risk of production activities associated with a specific market. A diversified firm is more resilient. During downturns in some markets, it can offset losses at the expense of others. In addition, the mere fact of having a diversified company can scare off potential competitors, since they are aware of its ability to compete for longer and more severely. From this point of view, diversification acts as an entry barrier. On the other hand, diversification is used as a method of entering new markets, as it reduces the risk of bankruptcy and the degree of dependence on the economic environment.

Product differentiation means a variety of products that satisfy the same need and have the same basic characteristics. Firms producing a differentiated product operate in the same market. Examples of product differentiation are different brands of cigarettes, cars, household appliances. Differing in packaging, labeling, minor internal modifications, the goods continue to belong to the same trademark. Product differentiation creates additional barriers to entry into the industry, as it creates an attractiveness of a certain product brand for certain categories of consumers (the so-called brand loyalty), as a result of which new firms have to overcome stereotypes of consumer behavior. It is especially difficult for new firms in the context of aggressive advertising of companies already operating on the market: the minimum effective size should increase due to the fact that fixed costs grow due to the inclusion of additional advertising costs in them. Thus, in the context of product differentiation, firms have to spend additional resources to create and maintain their company's image.

Empirical studies of barriers to entry and exit to the market primarily center around the analysis of two questions:

1) the impact of barriers on the nature and rate of penetration of new competitors into the market;
2) the impact of entry barriers on the size of the economic profit of firms,

operating on the market.

One of the first studies of the dependence of the return per dollar of equity capital on various factors reflecting the height of barriers to market entry was carried out by W. Commander and T. Wilson for 41 industries in the United States. Their analysis showed that the most important factor driving the return per dollar of equity capital is the rise in the share of advertising spending in a firm's revenue. The earnings per dollar of equity capital were much less dependent on the size of capital, and even less so on the rate of growth in demand. D. Orr, on the basis of an analysis of 71 industries in Canada, where high profitability served as an incentive for new firms to enter, showed that the main factors discouraging entry are (in decreasing order of influence): concentration of sellers already operating in the market; absolute value of capital; high share of advertising costs in the volume of revenue; industry risk indicator; high share of R&D expenses in revenue.

Strategic barriers include:

price strategies to prevent entry, i.e. price manipulation in order to restrict the entry of new participants; in fact, this strategy boils down to setting a price that is not available to a new participant. Its implementation requires the fulfillment of a number of conditions. These are: a) the ability to accurately assess the costs of all market participants and the price elasticity of demand; b) the ability to maintain market shares corresponding to the current market participants at a constant level; c) the effect of the premise that potential competitors consider the output of the current participants to be unchanged. Such strategies are ineffective in the face of rapidly growing demand and in high-tech industries;
non-price strategies.

The following are used as non-price entry restriction strategies: a) additional investments in equipment, creation of excess production capacities; b) product differentiation; c) long-term contracts with suppliers, consumers, employees. The last two options have already been listed in the group of non-strategic barriers. Product differentiation and vertical integration can be used specifically to prevent the emergence of competitors, then they represent strategic constraints. In order for the non-price strategy to be effective, the following condition must be met:

where P1 is the profit of the operating company before the entry of a new participant

P2 is the expected profit of a potential market participant;

A- costs of non-price barriers.

If the calculations of the effectiveness of the barriers cover a long-term period of time, then they need to be adjusted to take into account the discounted costs and benefits. The decision on the policy of setting barriers is in direct proportion to the amount of profit received by the firm in the market in the absence of entry, the value of the discount coefficient, and inversely to the costs required to establish effective entry barriers.

Introduction ………………………………………………………………… .... 3-5

1. Theoretical aspects of barriers to entry and exit from the market ... ... 5

1.1. The concept of barriers, their essence, content and types ……………… .5-7

1.2. Conditions for the emergence and economic nature of barriers …… ..7-10

2. Barriers to entry and exit from the market as factors of behavior

firms ………………………………………………………………… ... 11-14

2.1. Positive returns to scale and minimally efficient

issue ………………………………………………………………… ..14-16

2.2 Functioning of barriers in the context of vertical integration and

differentiation activities of the company ………………………… ..16-18

2.3. Height and effectiveness of barriers ……………………………… ...... 18-20

Conclusion ……………………………………………………………… 21-22

Literature ……………………………………………………………… ..23

Introduction.

“The development of the Russian economy poses new tasks for economists, and, consequently, new tasks arise for the professional training of economists. Until now, the predominant discipline of fundamental, the training of economists, remained courses of general economic theory in the form of micro- and macroeconomics, but now a good theoretical base is required in special areas. One of such areas of fundamental economic theory is the economic theory of markets - the science of the methods of formation, types and economic consequences of the functioning of market structures, which includes the features of the behavior of enterprises at the level of individual industries and regions. This theory shows how this or that behavior of an economic entity develops, how it is modified depending on the real and expected actions of other economic agents, including the state. Market theory provides a classification of market structures, methods for assessing the strength of an economic agent's influence on market parameters. This theory is of particular importance from the point of view of effective industrial and anti-monopoly policy of the state. " one

The aim of the course work is to study the emergence and nature of barriers to market entry and exit from the market, to compare the value of different types of barriers for the economy.

1. Get acquainted with the concepts of barriers, their essence and types.

2. Consider the factors of the firm's behavior in different conditions of the economy.

one . Avdasheva S.B., Rozanova N.M., Theory of the organization of industry markets. M., 1998., Ch. 2. Pp. 38-64

3. Compare and classify the types of industries according to the height and effectiveness of entry barriers.

The theory of the organization of market structures is a relatively new area of economic theory, especially rapidly developing at the present time. As the name suggests, the theory deals with the organization of individual markets and industries, studies the activities of firms.

I . Theoretical aspects of barriers to entry and exit from the market.

1.1. The concept of barriers, their essence, content and types.

Market- is a system of relations in which the links between buyers and sellers are so free that prices for the same product tend to equalize quickly.

Market- is a collection of buyers and sellers, the interaction of which ultimately leads to the possibility of exchange.

Market is a mechanism for the transfer of property rights.

The definition of a specific market is related to the purpose and methodology of the research. The first step is to define the boundaries of the market. Usually in the scientific literature, the following are distinguished border types :

1) Product boundaries- reflect the ability of goods to replace each other in consumption

2) Time boundaries- characterize the investigated time interval, as well as the boundaries of operation of the sold goods

3) Local boundaries- define the spatial boundaries of the market. Such boundaries depend on the severity of competition in the national and competitive market, as well as on the magnitude of the barriers to entry of external sellers into the regional market.

It is necessary to give a clear distinction between the market and the industry.

Industry- a set of enterprises producing similar products using close resources and close technologies.

The market is united by the need being met. Industry - by the nature of the technologies used.

The structure of the market is determined by the number and size of firms, the nature of the products, the ease of entering and exiting the market, and the availability of information.

Usually in the economic literature four types of market structures are considered (perfect competition, monopolistic competition, oligopoly, monopoly).

Market entry barriers- factors of an objective and subjective nature, because of which it is difficult, and sometimes even impossible, for new firms to start a business in the chosen industry; as a result, existing firms need not fear competition.

Non-strategic barriers to entry- are created by the fundamental conditions of the industry and, in general, are independent of the firm's activities or are weakly amenable to its influence.

Strategic barriers to entry- are created by the company itself as a result of the implementation of its purposeful policy.

Market exit barriers- exit from the industry in case of failure is associated with significant costs, which means that the risk of activities in the industry is too high, so the likelihood of a new seller entering the industry will be low

“Barriers to market entry and exit are critical characteristics of market structure. Market entry barriers are factors of an objective or subjective nature that make it difficult and sometimes impossible for new firms to start a business in the chosen industry.

Thanks to these types of barriers, firms already operating in the market need not fear competition. The presence of a barrier to exit from the industry leads to the same results. If exit from the industry in case of failure in the market is associated with significant costs (for example, the production of a product requires highly specialized equipment that would not be easy to implement in the event of a bankruptcy of the company) - therefore, the risk of activity in the industry is high - the likelihood of a new seller entering the market is relatively low . " 2

It is the presence of barriers to entry, combined with a high level of concentration of producers in the industry, that allows firms to raise prices above marginal costs and receive positive economic profits not only in the short term, but also in the long term, which determines the bargaining power of these firms. Where barriers to entry do not exist or are weak, firms, even with high market concentration, are forced to take into account competition from actual or potential rivals.

1.2. Conditions for the emergence and economic nature of barriers.

An attempt to explain the phenomenon that on certain industry

2. The firm as an economic agent // Textbook on the basics of economic theory. M. 1994.S. 133 - 164

In markets, firms consistently and systematically have higher rates of return than firms in other industries, suggesting that there may be barriers to entry for new firms in this market, preventing them from exploiting a favorable market situation.

Bain gave the name to this phenomenon entry barriers, allowing existing firms to receive excess profits without fear of competitors entering. Chamberlin's works also explored potential competition issues and the associated difficulties of firms entering the industry market. They showed the decisive role of the degree of difficulty in entering the market in establishing the relationship between the curves of costs and revenue of the firm. Later, the work of other economists appeared.

As a result of studies of this problem, various economists have proposed alternative interpretations of entry barriers. Their review is presented in the work of A. Shastitko. Thus, according to D.Bane's approach, an entry barrier exists if a new firm cannot achieve the same level of profitability after entry that already operating firms had before they entered the market.

It should be noted that D.Bane considers not all firms as potential firms, but only those that have the same advantages in order to qualify for entry into the industry.

Later D. Stigler proposed to define barriers based on

asymmetries in the behavior of operating and entering the market firms.

In detailing this definition, S. Weizsacker considered entry barriers as production costs that should be borne by a company seeking to enter the industry market, and not by existing

“Barriers can be generated by objective characteristics of the industry market associated with production technology, the nature

consumer preferences, dynamics of demand, foreign competition, etc. Such barriers are referred to as non-strategic factors of the market structure. Another type of barriers is the barriers caused by the strategic behavior of firms operating in the market (strategic pricing, restricting the entry of potential competitors into the industry, strategic policy in the field of research and innovation spending, patents, vertical integration and product differentiation, etc.). " 3

Freedom of entry and exit from the industry market plays a major role in determining the market structure and subsequent functioning of firms. The height and duration of entry-exit barriers vary across industry markets. The degree of freedom to enter and exit the market is also a variable and largely determines the dynamics of firms in the markets, which, in turn, can have different results. Some markets are highly dynamic, others are more stable, and the number of firms operating in them does not change much.

The entry of new firms into the market can cause changes in the market situation, namely, increase competition and pressure on firms already operating in the market towards the need

3 Tyrol J. Markets and market power SPb., 1996. P.340-347.

increasing production efficiency, i.e. force to adapt to changes or look for other, more adequate markets for them. The entry of new firms can also facilitate the introduction of new products and technologies.

The conditions for firms to enter the market are determined by various factors, and therefore barriers to entry are classified by type. In particular, the dominant position of a firm in the market can be used by it to create strategic barriers.

and setting monopoly high prices. Many Russian industry markets are widely represented, for example, administrative

effective barriers to entry, which is a specific feature of the country's economy. In this regard, we will consider in this chapter the nature and types of barriers to entry into the industry, various types of structural barriers and factors affecting the entry and exit of firms.

Chapter II ... Barriers to market entry and exit from the market as factors of firm behavior

Barriers to market entry and exit are critical characteristics of market structure.

"Barriers to Market Entry- such factors of an objective or subjective nature, because of which it is difficult and sometimes impossible for new firms to start their own business in the chosen industry. Thanks to these kinds of barriers, firms already operating in the market need not fear competition. " 4

The presence of a barrier to exit from the industry leads to the same results. If exiting the industry in the event of market failure is associated with significant costs.

Market entry barriers can be divided into two groups: strategic and non-strategic barriers. Consider non-strategic barriers first.

TO non-strategic barriers market entry and exit include the following factors:

1.Positive returns to scale and Minimum Efficient Release;

2. vertical integration;

3. diversification of the firm's activities;

4 . Avdasheva S.B., Rozanova N.M., Theory of the organization of industry markets. M., 1998., Ch. 2. S.38-64.

4. product differentiation;

5. elasticity and growth rates of demand;

6. foreign competition;

7.institutional barriers

« Strategic (subjective) the barriers are created by the deliberate activity of the firms themselves, by the strategic behavior that prevents new firms from entering the industry. These include such activities of firms as: saving innovations, long-term contracts with resource suppliers, obtaining licenses and patents for this type of activity, maintaining unused capacities, as well as all ways to increase the minimum effective output for the industry - increasing advertising and R&D costs. , marketing research, the costs of creating the company's image. " 5

Strategic barriers can also be manifested in pricing and sales policies, peculiarities of manufacturers' activities as holders of patents, licenses, trademarks. The presence of strong business ties and informal relationships with suppliers of resources and buyers of goods also plays the role of a strategic barrier. The large size of the economic turnover and the well-oiled production process make it possible to create reserve capacities that can be used to conduct price competition and rapid expansion into unoccupied market segments, as well as to use various agreements 5 Bayeux M.R. Management economics and business strategy. M., 1999. Ch. 7. The economic essence of the industry. S. 288-309.

and preferential settlement regimes with suppliers and consumers, thereby pushing back competitors.

Effectiveness of strategic barriers

The concept of the effectiveness of barriers to entry policy is based on the fact that the strategy of discouraging entry of new firms is associated with a certain cost for firms operating in the industry. It can be

costs associated either directly with the pricing policy - a relative reduction in prices to exclude potential competition, or with various methods of non-price competition (investments in capacity, the cost of creating an "excess" distribution network, the cost of improving quality to create a reputation effect, etc.). ).

The effectiveness of strategic barriers to entry is determined by comparing the firm's profits from abandoning the barriers policy with the profit that is possible if appropriate measures are taken to block new sellers from entering the market.

Let the firm receive economic profit in the current period. If the firm does not take care of barriers to entry, new firms will enter the market, competition will arise, and economic profits will drop to zero.

2.1. positive returns to scale and minimum efficient release

Positive returns to scale create objective barriers to entry for potential competitors due to the cost advantage of large producers. An indicator characterizing entry barriers,

caused by positive returns to scale, is the so-called minimum efficient output (MEW, MES).

Minimum effective release- this is the volume of output at which the positive return to scale is replaced by a constant or decreasing, the firm reaches a minimum level of long-term average costs.

The number of firms operating in an industry in a state of long-term equilibrium is determined by the ratio of the volume of market demand at a price equal to the minimum value of long-run average costs to the minimum effective output (provided that the production function and cost structure of all firms in the industry are identical).

n is the number of firms in the industry;

Qd - market demand by price;

minLRAC - unit cost;

q is the minimum effective release.

If there is a number of firms in the industry greater than n, at least some of them will produce goods with costs greater than the minimum value of long-run average costs, and price competition between them will lead to a decrease in prices to the level of mini-

average costs, so that a number of firms will suffer losses and will be forced to stop production.

Additional information required to draw conclusions about the height of barriers to entry into the industry is the cost advantage indicator - the ratio of the average value of added value per one working large enterprise to the corresponding indicator for small enterprises in the industry. Studies by Western scientists have shown that a high minimum effective volume of output only creates significant barriers to entry into the industry when the cost advantage of large enterprises is higher than 1.25.

2.2. Functioning of barriers in the context of vertical integration and differentiation activities of the firm.

Vertical integration assumes that a firm operating in a given market is also the owner of either the early stages of the production process (integration of the first type, integration of resources), or later stages (integration of the second type, integration of the final product).

An example of the first type of vertical integration is an automobile firm that owns a steel mill that serves its steel needs. An example of vertical integration of the second type is an oil refinery that owns a network of gas stations.

Vertical integration provides the firm with more bargaining power than the bargaining power that a firm would have based only on

from the volume of their sales in this market. A vertically integrated firm has additional competitive advantages. since it can reduce the price of the goods to a greater extent or receive a greater profit at a given price due to lower costs either for the purchase of factors of production, or for the sale of the final product.

Vertical integration creates entry barriers not only due to the cost advantage of existing sellers in the market. An important consequence of integration is the increased influence of sellers on the market.: if one of the firms operating in the market is the largest owner of the factors of production or controls the sale of final products with the widest distribution network, it is more difficult for new firms, especially if they are not integrated, to access this market.

If a potential competitor must pursue a policy of vertical integration in order to successfully enter the market, he is faced with the problem of attracting financial resources.

3. Diversification of the firm

Diversification reflects the distribution of a firm's output among different target markets. A diversified firm is usually larger than a non-diversified firm. This increases the minimum effective output in the industry, making it difficult for new firms to enter, or the firm has a cost advantage, which also strengthens its bargaining power.

Diversification of activities allows the firm to reduce the business risk associated with a particular market. A diversified firm is more stable due to the ability to compensate with profits from activity in one market for possible losses that the company suffers in another. In addition, the very fact of having a diversified company in the industry scares off potential competitors, as they are aware of its ability to compete for longer and more aggressively.

On the other hand, diversification is used as a method of entering new markets, reducing the risk of bankruptcy and the degree of dependence on the economic environment.

2.3 Height and effectiveness of barriers

J. Bain identified four types of industries in terms of the height and efficiency of entry barriers. Its classification has become generally accepted in the theory of the organization of industrial markets:

1.Free entry markets: firms already operating on the market
do not have any advantages over potential
my competitors. In markets with free entry, full mobility of resources is ensured, the price in the industry is set at the level
marginal cost.

2 Markets with ineffective barriers to entry: firms in the industry can use different pricing and non-pricing policies to discourage outsider firms from entering, but this
politics will not be preferable for them to a policy of making a profit in the short run.

3 Markets with effective barriers to entry: the ability to discourage new firms from entering is combined with the preference for
kind of policy for firms operating in the industry.

4 Blocked Entry Markets: Entry of New Firms to the Market
completely blocked by old firms in both the short and long term
urgent periods.

Obviously, the study of the first and fourth types of markets is interesting, but the study of the second and third situations seems to be even more fruitful in theoretical and practical terms. It is easy to see that in the markets of the "intermediate" type, the presence or absence of strategic barriers to entry into the industry will depend on a number of indicators characterizing the position of firms.

“The concept of the effectiveness of the entry barriers policy is based on the fact that the strategy of preventing the entry of outsider firms is associated with certain costs for firms operating in the industry. These can be costs associated either directly with the pricing policy - reducing prices to exclude potential competition, or with various methods of non-price competition (investments in capacities, the cost of creating an "excess" distribution network, the cost of improving quality to create a reputation effect, etc.). etc.). In the first case, the costs of creating barriers to entry can be considered as implicit, in the second case

How explicit. In any case, the profit of the firm (firms) pursuing the policy of creating barriers to entry will be less than the profit of the firm that does not practice strategic behavior. The effectiveness of strategic barriers to entry is determined by comparing the firm's profits from abandoning the barriers policy with the profits possible under the condition

implementation of appropriate measures blocking the entry of new sellers into the market. " 6

6 Gruzinov V.P., Gribov V.D. Enterprise Economics: Textbook. Benefit. - 2nd ed .. add. - M .: Finance and statistics, 2002. - 208s: il

Conclusion

Empirical research on barriers to entry in modern theory focuses on the study of two aspects:

The impact of barriers to entry on the scale and speed of penetration of new competitors into the market;

The influence of barriers to entry on the size of the economic profit of firms operating in the market.

The main purpose of the analysis is to compare the significance of different types of barriers for the economy as a whole, as well as for different industries.

One of the first studies of the dependence of returns per dollar of equity capital on various factors reflecting the height of barriers to market entry was carried out by W. Commander and T. Wilson 9 for 41 industries in the United States. Their analysis showed that the most important factor driving the return per dollar of equity capital is the rise in the share of advertising spending in a firm's revenue. The earnings per dollar of equity capital were much less dependent on the size of capital, and even less so on the rate of growth in demand.

D. Orr, on the basis of an analysis of 71 industries in Canada, where high profitability served as an incentive for new firms to enter, showed that the main factors discouraging entry are (in decreasing order of influence): concentration of sellers already operating in the market; absolute value of capital; high share of advertising costs in the volume of revenue; industry risk indicator; high share of R&D expenses in revenue. M. Porter (USA) pointed out the differences in the factors that determine the value of the return on capital ratio for firms that are leaders in

determining the price or volume of sales and for outsider firms, "agreeing with the price" of the leader.

For the leading firms, a positive dependence of the return on capital on concentration and on product differentiation was established, and the dependence on the volume of capital use and the growth rate of demand was not established; for the firms-followers ("agreeing with the price") a positive dependence of the return on capital on the volume of capital use and on the capital intensity of production was established.

Thus, we see that the structure of the market is a more complex concept than it seems at first glance. The market structure has many facets, which is reflected in its various indicators. We examined the indicators of the concentration of sellers in the market and discussed their main properties. The value of the concentration of sellers in the market is extremely important in determining the market structure. However, the concentration of sellers does not in itself determine the level of monopoly power - the ability to influence the price.

Only with sufficiently high barriers to entry into the industry can the concentration of sellers be realized in monopoly power - the ability to set a price that ensures a sufficiently high economic profit. We have described the main types of barriers to entry into the industry, mainly non-strategic barriers that do not depend on the deliberate actions of firms.

We examined the main indicators that allow characterizing the level of monopoly power in the markets and the problems associated with their measurement.

Market structure is not an exogenous factor in the economy and is influenced by the behavior of firms operating in the market. In the following, we will look at how the strategic pricing and non-pricing policies of firms affect the characteristics of the market.

Literature

1.S.B. Avdasheva, N.M. Rozanova "Theory of the organization of sectoral markets" Textbook-M: IPP "Magistr Publishing House", 1998-320 p

2.Bayeu M.R. Management economics and business strategy. M., 1999. Ch. 7. The economic essence of the industry. S. 288-309.

3.Vuros A., Rozanova N. Decree. Op. S.220-221.

4. Gruzinov V.P., Gribov V.D. Enterprise Economics: Textbook. Benefit -2nd ed. Add.-M .: Finance and statistics, 2002 -208 p: ill.

6. Tyrol J. Markets and market power SPb., 1996. С.340-347.

7. Ed. Terekhina V.I. Financial management of a firm M .: Economics, 1998 P. Sheremet A.D., Sayfullin R.S. Enterprise finance, M .: INFRA-M. 1998 year

9.Finance ed. Prof. L.A. Drobozina M.: UNITY, 20

10.Sherer F.M., Ross D. The structure of industry markets. M., 1997.S. 15-27. , Ch. 3 S. 55-85.

11. Economic school. Issue 4.1998, p. 286.

12. School of Economics. Issue 4. 1998.S. 287.

13. Enterprise Economics: Exam Answers, edited by A.S. Pelpha. Rostov-on-Don: "Phoenix", 2002-416 p.

School of Economics. Issue 4.1998, p. 286.

2. School of Economics. Issue 4. 1998.S. 287.

3. Scherer FM, Ross D. The structure of industry markets. M., 1997.S. 15-27. , Ch. 3 S. 55-85.

4. Tyrol J. Markets and market power SPb., 1996. P.340-347.

5. Kirtsner I.M. Competition and Entrepreneurship. M .: 2001. Ch. 3. Competition and Monopoly. S. 93-133.

6 Bayeux M.R. Management economics and business strategy. M., 1999. Ch. 7. The economic essence of the industry. S. 288-309.

7.S.B. Avdasheva, N.M. Rozanova "Theory of the organization of sectoral markets" Textbook-M: IPP "Magistr Publishing House", 1998-320 p

8. The firm as an economic agent // Textbook on the basics of economic theory M. 1994. S. 133-164.

9. Enterprise Economics: Exam Answers, edited by A.S. Pelpha. Rostov-on-Don: "Phoenix", 2002-416 p.

10. Gruzinov V.P., Gribov V.D. Enterprise Economics: Textbook. Benefit -2nd ed. Add.-M .: Finance and statistics, 2002 -208 p: ill.

11.Finance ed. Prof. L.A. Drobozina M.: UNITY, 20

12. Ed. Terekhina V.I. Financial management of a firm M .: Economics, 1998 P. Sheremet A.D., Sayfullin R.S. Enterprise finance, M .: INFRA-M. 1998 year

Barriers to entry

Barriers to entry for companies to the market

Barriers to entry for companies to enter the market include:

Advertising- Firms already on the market can make it difficult for new competitors to emerge through high advertising costs that new companies are unlikely to pay. This theory is known as the "advertising market power theory". Established companies, through advertising, create consumer perceptions of their brand as being different from others to the point that consumers perceive it as a slightly different product. Because of this, the products of the existing companies cannot be equivalently replaced by the products of the company with the new brand. This makes it very difficult for new companies to attract buyers.
Resource management- If a company controls the required resource for a specific industry, then other companies cannot enter this market.
Benefits regardless of the size of the company- Possession of technology, know-how, preferential access to materials, preferential geographic location, learning curve.
Customer loyalty- Large companies in the market may have loyal customers for their product. Having strong brands in place can be a serious barrier to entry.
Agreements with partners- Exclusive agreements with major suppliers or retailers can create problems for those entering the market.
Economies of scale- Larger companies can produce goods at a lower cost than smaller companies. Cost advantages can sometimes be quickly overcome by technology.
State regulation of the economy- May make it difficult or impossible to enter the market. In extreme cases, the state can make competition illegal and establish a state monopoly. License and permit requirements can also increase the investment required to enter the market.
Inelastic demand- One of the ways to enter the market is the underestimated cost of goods relative to those on the market. However, this strategy is ineffective if buyers are insensitive to product prices.
Intellectual property- Entering the market requires access to the same production technology or know-how as the monopolist. Patents give companies the legal right to prohibit other companies from manufacturing a product for a specified period and thus restrict market entry. Patents are aimed at the development of inventions and scientific and technical progress by stimulating the financial profitability of these activities. Likewise, a trademark can become a barrier to entry for a particular product when the market is dominated by one or more well-known names.
Investments- especially noticeable in areas with economies of scale and / or natural monopolies
Network effect- When a product or service has a value that depends on the number of customers, competitors have problems because the already operating company has a large customer base.
Predatory pricing policy- the dominant company sells goods at a loss, in order to complicate the situation for new companies that cannot withstand such a competition with a larger company with a reserve of its own funds and easier access to credit. It is prohibited by law in most countries, but these actions are difficult to prove.
Restrictive trading practices such as air transport arrangements preventing new airlines from obtaining landing seats at some airports.
Preferred access to raw materials- allow you to get a higher margin than new market players, as well as create difficulties for competitors by disrupting the delivery schedule.
Preferred geographic location- location of production facilities closer to raw materials or sales markets; more favorable government regulation and taxation, gives an advantage in margin compared to competitors.
R&D“Some products, like microprocessors, require a lot of investment in technology that stops potential competitors.
Sunk costs- A sunk cost cannot be earned upon leaving the market. Because of this, they increase the risk of entering the market.
Vertical integration- The company's coverage of several levels of production allows the product to be fully brought to the required conditions at each level, which complicates the production of goods of the same quality for new market participants.

Barriers to entry for individuals into the labor market

Examples of barriers to entry for individuals into the labor market include education, licensing, or a job quota.

On the one hand, these barriers should ensure that people entering this market have the necessary qualifications, on the other hand, this reduces competition in the market. Also, because of this, there is an effect of additional cost for professionals in some areas.

Entry barriers and industry structure

Perfect competition: entry barriers completely absent.
Monopolistic competition: low entry barriers.
Oligopoly: high entry barriers.
Monopoly: entry barriers from very high to absolute.

Notes (edit)

Wikimedia Foundation. 2010.

See what "Barriers to entry" are in other dictionaries:

Barriers to market entry (exit from the market) financial services- factors and circumstances of a legal, organizational, technological, economic, financial nature that prevent (hinder) a financial organization from entering the financial services market, as well as leaving this market ... Source ... Official terminology

BARRIERS TO MARKET ENTRANCE- - 1) an element of the market structure that characterizes the obstacles to the entry of new participants on the market. They are of a different nature: a) the lower cost advantage of established firms arising from the fact that they own a significant share ... ...

Barriers to entry- (barriers to entry, entry) factors that prevent new competitors from entering the industry (market) through increased risk and increased costs for new firms ... Economics: glossary

Oligopoly- (Oligopoly) Definition of oligopoly, oligopolistic market Information about the definition of oligopoly, oligopolistic market Content Content Oligopoly Theories of oligopoly Organizational and economic forms of concentration ... ... Investor encyclopedia

Schematic representation of Porter's five forces. Porter five forces analysis methodology for ... Wikipedia

Market structure in the economy, the configuration of industries depending on the number of companies producing identical products. Varieties of market structures: Monopolistic competition, or a competitive market where there is a large ... ... Wikipedia

Behavioral economics is an area of economics and related areas, for example, the theory of behavioral finance, which studies the influence of social, cognitive and emotional factors on economic decision-making by individuals and ... ... Wikipedia

Monopoly- (Monopoly) Monopoly is the absolute predominance in the economy of a sole producer or seller of products. Definition of monopoly, types of monopolies and their role in the development of the market economy of the state, state control over ... ... Investor encyclopedia

OLIGOPOLIA- - the type of market structure, which is characterized by the following features: a) a small number of firms and a large number of buyers. This means that the volume of the market supply is in the hands of several large firms that sell products to many ... ... Economics from A to Z: Thematic guide

The exclusive right of production, trade, etc., belonging to one person, a certain group of persons or the state; generally the exclusive right to anything. MONOPOLY is also called a large company that has a decisive role in any area ... ... Financial vocabulary

Books

On Quasi-Competition in the Russian Air Passenger Transportation Market and on the Possibility of New Airlines to Enter the Industry, S. A. Lukyanov. Based on the results of a comprehensive survey of airlines in the Russian Federation, conducted in the winter of 2006–2007, the article analyzes the main barriers to entry into this industry. We do… electronic book

In economic theory, there is an approach that considers the number of market participants and the size of their market share as secondary criteria, and considers barriers to entry and exit from the market to be the main indicator of the shape of the market and the state of the competitive environment in the market. This approach was developed in the form of the theory of adversarial markets. (contestable markets). This theory is based on the premise that as long as entering and exiting a market does not involve serious difficulties for a firm, there is potential competition in the market, and buyers and sellers act in the same way as in conditions of perfect competition.

Most often barriers to entry and exit it is considered as the sum of costs incurred by a firm entering the market or a firm leaving the market. A company that already operates on the market does not incur costs associated with acquiring rights (patents, licenses, etc.) to intellectual property, without which it is impossible to carry out some activities, produce goods and provide services. A firm already known to buyers does not need to spend large budgets on promotional advertising, collecting information about the market - these are all the costs associated with entering a market that is new for the firm. When exiting the market, costs arise that will not be covered by amortization deductions in the future, they will remain a loss of the enterprise (costs associated with the disposal of special equipment and materials, the acquisition of special knowledge and skills, the cost of purchasing IP that have not been amortized and not may be sold, etc.).

Barriers to exit from the market influence the decision to enter the market, because if in case of failure it is impossible to leave the market without a significant loss of invested funds, then is it worth entering it?

All barriers can be divided into two categories: strategic (set at the initiative of market participants) and non-strategic (formed as a result of a certain combination of environmental conditions).

Strategic barriers include:

constant updating of goods and technologies based on the implementation of R&D results - this requires significant costs, which pay off in the long term;
long-term contracts with suppliers of resources or workers, entered into in such a way that suppliers or contractors do not have free capacity to service a new enterprise entering the industry. This group of barriers can include control over sources of mineral and other raw materials. For example, control over deposits ensures that no producer can buy raw materials in a given area at a price lower than the established one;
obtaining licenses and patents for this type of activity and maintaining them in force, which also requires financial costs;
an increase in advertising and R&D costs, marketing research, and the cost of creating a firm's image leads to an increase in the minimum effective sales volume in the industry;
price barriers - setting a price that gives an enterprise the opportunity to receive only minimal profits or generally only cover costs. Dumping pricing (setting prices below cost) is prohibited by law, but difficult to prove. To use this barrier, industry enterprises must have an accurate understanding of the ratio of aggregate demand and aggregate supply and be ready to receive minimal profit in the short term. The use of such a barrier requires an enterprise to choose between maximizing short-term profits and banning new ventures from entering the industry, which ensures the long-term sustainable state of the competitive environment in the industry. Often this barrier is formed artificially and is supported by oligopolists or monopolists on the basis of inflated costs, while the effective minimum volume of production is much less than declared by enterprises operating in the industry.

Non-strategic barriers usually arise as a result of a combination of environmental conditions, legislative acts and are little dependent on the activities of enterprises in the industry. These include:

product differentiation within the range of products sold by a separate enterprise. In this case, it is difficult for a new enterprise to find its market niche, since most of the substitute products are already on the market. The buyer has the illusion of competition between several brands, although all of these brands are produced by one manufacturer;
irreversible costs arising from investing in special equipment and other assets that are difficult to sell if left from the market.

The generally accepted classification of sectoral markets depending on the effectiveness of barriers to entry to the market is the classification of J. Bain. In his work Burners to New Competition four types of sectoral markets have been identified.

1. Branches with free entry. Enterprises present on the market have no advantages over potential competitors. In such markets, resources are fully mobile, the price of a product in the industry is set equal to the marginal cost.
2. Industries with ineffective entry barriers. Enterprises present on the market can set barriers to entry using various methods of pricing and non-pricing policies, but it is preferable for them to make a profit in the short term. The problem is that barriers to entry remain effective for a short time, while new businesses can enter the industry in the long run.
3. Industries with effective barriers to entry. Barriers to entry are effective in the short and medium term, but in the long term, some enterprises enter the industry and disrupt the existing structure of the industry.
4. Blocked markets. The number of enterprises in the industry has remained stable for a long time. Entry of new enterprises to the market is impossible due to high persistent barriers in both the short and long term.

EXAMPLE 11.1

The absence of barriers to entry into the dairy market for suppliers from the Republic of Belarus led to the fact that during 2012 Russian producers of butter, powdered milk, hard cheeses and other milk-intensive goods could not sell their products not only profitably, but at least at cost. Russia and Belarus have an agreement on indicative prices for milk and dairy products; however, since the beginning of 2012, Belarusian producers began to increase the supply of milk, butter, milk powder and other types of dairy products, violating the level of indicative prices.

The National Union of Milk Producers (Soyuzmoloko) described the current situation as dumping on the part of importers, but the Belarusian side insisted that participation in the Union State and Russia's accession to the WTO meant complete openness of the Russian market for Belarusian suppliers, abandonment of such regulatory methods as restrictions for the import of goods, setting threshold prices, etc.

State subsidies allow Belarusian producers to keep prices low. In Russia, each liter of milk produced is subsidized by 0.2-0.5 rubles, and in Belarus, about five times more. As a result, Belarusian producers can supply milk and dairy products to the Russian market at prices below market prices, and Russian producers cannot compete with them on prices.

Wholesale and retail trade of Belarusian dairy products turns out to be much more profitable than Russian ones. As a result, Belarusian dairy products are replacing domestic ones from retail.

First work in this direction: Bain Joe S. Barriers to New Competition. Cambridge, 1956.

ENTRANCE BARRIERS (barriers to entry) - an element of the MARKET structure, characterizing the obstacles to the entry of new participants on the MARKET. Barriers to market entry are of a different nature:

(a) the advantage of lower costs for established firms, resulting from the fact that they own a significant share of the market and realize in production and distribution of economies of scale;

(b) a strong consumer commitment to the products of established firms, resulting from activities aimed at product differentiation;

(c) control over sources of raw materials, technology and markets by established firms, exercised either by direct ownership or through patents, franchises and exclusive dealerships;

(d) large capital expenditures that new entrants must undertake in order to start production and cover the losses of the initial stage of market entry.

The economic significance of barriers to entry is that they can block MARKET ENTRANCE and thereby enable established firms to obtain and affect the resource allocation function performed by the markets.

The above factors can pose serious problems for a small, greenfield new entrant (see Emerging Investments). However, they may have little or no impact on a large financially resourced conglomerate firm that is attempting to enter this market through a merger or acquisition of an established manufacturer. Moreover, the underlying theoretical premise of access, that established firms always have an edge over potential participants, must also be challenged. In a dynamic market environment, new entrants can introduce new technology ahead of existing firms, or develop a new product that will give them a competitive edge over established firms.

See also entry conditions, limit pricing, potential competitor, , monopoly, flexible production system,

EXIT BARRIERS (barriers to exit) - an element of the market structure that characterizes the obstacles to a firm intending to exit the market, which keep the firm in the market despite the decline in sales and profitability. Exit barriers are determined by whether the firm owns or leases the assets it uses; whether these assets have a special purpose or can be used in other directions; whether it is possible to sell assets in the used property markets; what is the degree of underutilization of the market capacity and the degree of development of production and sales infrastructures. Exit barriers determine the ease with which firms can exit declining markets, and thus affect both the profitability of firms and the functioning of markets.

Cm. , , .

NON-REFUNDABLE COSTS (sunk cost) - any expenditure on specialized durable inputs such as machinery and equipment that cannot be used for other purposes or are quickly resold. Irretrievable costs do not affect marginal costs and do not affect short-term manufacturing decisions.

POTENTIAL COMPETITOR (potential entrant) is a company willing and able to enter the market. In market theory, a potential entry turns into a real one when:

(a) firms operating in the market receive super profits;

(b) the new firm is able to overcome the barrier of entry.

Real new entry plays an important regulatory role in eliminating excess profits and increasing market supply (see, for example, perfect competition). However, even the mere threat of potential entry can be effective in ensuring that existing firms provide market efficiency and price in line with production costs.

Potential competitors can be: new firms; firms that regularly supply the market with resources or are regular consumers (vertical entry); firms that operate in other markets and are looking for new directions to expand their activities (diversified entry).

See also entry conditions, market entry, , diversification, market of potential competition,

MARKET OF POTENTIAL COMPETITION (contestable market) - a market in which entering firms bear approximately the same costs as established firms, and upon exiting from which firms are able to recoup their fixed capital costs minus impairment. Thus, established firms cannot receive excess profits, since they will be liquidated when new firms enter the market; sometimes the mere threat of new competitors entering the market can be enough to force existing companies to set prices that bring them only normal profit. All PERFECT competitive markets are potentially competitive, but even some oligopolistic markets (see oligopoly) can be potentially competitive if market penetration and exit are readily feasible.

See effective competition, entry conditions, entry barriers, exit barriers.

William J. Baumol COMPETITIVE MARKETS: RISE IN INDUSTRY STRUCTURE (Milestones, Vol. 5)

Halperin V.M. Microeconomics. 12A.1. Competitive Markets

William J. Baumol. Determinants of Market Structure and Competitive Market Theory

MARKET (market) - an exchange mechanism that establishes direct contact between sellers and buyers of a product, factor of production or security. Markets differ in commodity, spatial and physical terms. In relation to products, the market consists of groups of goods or services that are viewed by buyers as substitute goods. Thus, from the point of view of the buyer, women's and men's shoes are two separate markets serving the needs of different categories of buyers.

Spatially, the market can be local, national or international, depending on conditions such as transport costs, the nature of the product and the uniformity of consumer tastes. For example, due to transport costs, cement and gypsum markets tend to be localized. Likewise, Bavarian beer only caters to a specific regional flavor, while Coca-Cola is marketed worldwide as a recognized brand name.

Physically, exchange transactions involving sellers and buyers can be carried out in a specially equipped place (for example, a local fish market, a wool exchange) or in more amorphous forms (for example, buying and selling shares and stocks by telephone using international dealer communication systems ). Finally, in some markets, sellers deal directly with end customers, while in others, transactions are conducted through a chain of intermediaries, such as wholesalers, retailers, brokers and banks.

Economists generally define a market as a group of products that are viewed by consumers as interchangeable (that is, have a high positive cross-elasticity of demand). This market concept may not correspond EXACTLY to INDUSTRY classifications that group products by industry (see industry) in terms of their technical or manufacturing characteristics rather than consumer interchangeability. For example, glass bottles and metal cans are viewed by consumers as interchangeable goods (containers), but belong to different industrial sectoral classifications (glass industry and metallurgy, respectively).

Conversely, the “steel products” industry classification category, for example, may include such diverse customers as civil engineers, li (concrete slabs), car assemblers (carcases | cars), washing machine manufacturers (washing chambers ). However, due to the difficulty of obtaining reliable data on the cross-elasticity of demand, economists often revert to industry classifications as the best way to approximate markets in empirical analysis.

Market theory distinguishes between types of markets according to their structural characteristics, in particular the number of buyers and sellers involved in the exchange. There are the following types of market situations:

PERFECT COMPETITION = many sellers, many buyers

OLIGOPOLIA = few sellers, many buyers

OLIGOPSONY = many sellers, few buyers

BILATERAL OLIGOPOLY = few sellers, few buyers

DUOPOLY = two sellers, many buyers

DUOPSONIA = many sellers, two buyers

MONOPOLY = one seller, many buyers

MONOPSONY = many sellers, one buyer

BILATERAL MONOPOLY = one seller, one buyer

BUYER MARKET (buyer’s market) - a market situation in a short period when there is an excess supply of goods or services at current prices, which leads to a fall in prices in favor of the buyer. Wed ...

MARKET OF SELLERS(seller’s market) - a situation in the market in a short period, in which there is an excess demand for goods and services, which allows the seller to raise prices to his advantage. Wed

ENTRANCE CONDITIONS (condition of entry) - an element of the market structure that characterizes the ease or difficulty of new manufacturers entering the market. According to market theory, market access can be either completely free (as in the case of perfect competition, when new producers can enter the market and compete on equal terms with entrenched firms), or almost impossible (in a situation of oligopoly and monopoly, when the existing barriers to entry are rigid restrict market access). The significance of barriers to entry in market theory is that they allow established firms to generate long-term profits in excess of the equilibrium normal profits found in perfect competition (i.e., free market access).

See Market Entry, Potential Competitor, ,

MARKET ENTRANCE (market entry) - entry into the market of a new firm or firms. Market theory assumes that firms enter the market by creating new enterprises, thus leading to an increase in the number of competing producers (see emerging investment). The entry of new firms into the market occurs when firms entrenched in this market receive super-profits. The entry of new firms plays an important role in expanding the supply potential of the market and in eliminating surplus profits. In practice, the entry of new firms also occurs through an acquisition or merger with an existing firm.

Most markets are characterized by entry barriers that restrict or discourage entry, protecting established firms from new competitors.

See entry conditions, potential competitor, market of potential competition, perfect competition, monopolistic competition, oligopoly, monopoly, limit pricing,