Barriers to entry is a term used in economics and especially the theory of competition to refer to obstacles placed in the path of a firm who wants to enter a given market. It may refer either to an individual who is barred from entering some profession or trade, or to a firm or indeed a country that is barred somehow from entering an industry or trade grouping.

In this first category, i.e. individuals encountering barriers to entry in the job market, examples include educational or quota limits on the numbers of people who can enter the profession of lawyer, and educational and experiential requirements for people who wish to be neurosurgeons. Whilst both sets of barriers to entry may and do guarantee that people entering those fields are suitably qualified, the barriers to entry also reduce competition and have the effect of facilitating premium pricing of the skills. That is if just anyone could enter those fields, then the salaries would be expected to be lower.

In the second category, i.e. firms encountering barriers to entry, examples include restrictive air transport agreements that make it difficult for new airlines to obtain landing slots at some airports, and huge investment requirements for new antibiotics that make it difficult for new firms to compete against the drug majors. Firms that are already established within an industry can seek to make it difficult for new competitors to appear and prosper, e.g. by spending heavily on advertising that new brands would find it more difficult to afford.

Finally countries can encounter barriers to entry e.g. as witnessed by the long delays that some countries have encountered in their applications to join the European Community.

See also

• Anti-competitive behaviour
• Exclusive dealing