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Simple English definitions for legal terms
barrier to entry
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A quick definition of barrier to entry:
A barrier to entry is something that makes it hard for a new business to enter a market and compete with existing businesses. This could be because of rules or regulations that make it difficult to start a business, or because it costs a lot of money to get started. Basically, it's like a big wall that stops new businesses from coming in and competing with the ones that are already there.
A more thorough explanation:
A barrier to entry is an economic factor that makes it difficult for a new business to enter a market and compete with existing businesses. This can be due to various reasons such as:
- High start-up costs
- Regulatory limitations on entry
- Patents or copyrights
- Brand recognition and customer loyalty
For example, the pharmaceutical industry has high barriers to entry due to the extensive research and development required to bring a new drug to market. Additionally, the existing pharmaceutical companies have patents on their drugs, which prevent new companies from producing the same drug.
Another example is the airline industry, which has high start-up costs due to the need for expensive equipment and infrastructure. This makes it difficult for new airlines to enter the market and compete with established airlines like Delta or United.
Overall, barriers to entry can limit competition in a market and give established businesses an advantage over new entrants.