In this case, the barrier to entry turns from an old theoretical model to non-cooperative games, such as a limit pricing theory to the new theoretical framework to be enforced in economics.
At present, industrial concentration is no longer considered a barrier to entry.
In fact, excess of capacity works as barrier to entry if rivals believe the threats launched by incumbents.
Since the 1970's, several authors worked on disconfirming excess of capacity as a barrier to entry.
The point is when excess capacity does not lead to creation of a credible threat; it may still act as a barrier to entry by shifting the risk-return perceptions of potential entrants enough to redirect the potential entrants' investments into other industries.
As a conclusion, according to the light shed on the new research, the excess capacity doesn't work as a barrier to entry in the long run, because it is expensive, unless economies of large scale are being analyzed under the lens of sunk cost.
1710], and this is precisely the way it works as a barrier to entry because when advertising creates brand loyalty, followed by: 'Established firms are then able to charge high prices and earn significant profits without facing entry' [Bagwell, 2007, p.
It was Richard Schmalensee who explained how advertising works as a barrier to entry in the seventies.
During the eighties advertising survive as a barrier to entry but the theoretical framework changes.
Goodwill is not a barrier to entry, is necessarily only a partial solution of the quality information problem, this is due to quasi risk aversion of consumers.
Advertising erects a barrier to entry because the ability to create loyalty to the products of existing firms have dynamic effects on demand; the way to demonstrate this barrier to entry has been the correlation between profit rates and advertising intensity.