potential entrant

potential entrant

a FIRM that is willing and able to enter a MARKET given the right conditions. In the THEORY OF MARKETS, potential entry turns into actual entry into a market when:
  1. existing firms in the market are earning ABOVE-NORMAL PROFITS;
  2. newcomers are able to overcome any BARRIERS TO ENTRY.

‘Actual’ new entry plays an important regulatory role in a market in removing above-normal profits and in expanding market supply (see, for example, PERFECT COMPETITION). However, the mere ‘threat’ of potential entry may in itself be sufficient to ensure that existing firms supply the market efficiently and set prices that are consistent with supply costs.

Potential entrants to a market may be newly established firms, firms that currently supply the market with inputs or that are currently its customers (vertical entry), or firms that currently operate in other markets and are looking to expand their activities in new directions (diversified entry). See also CONDITION OF ENTRY, MARKET ENTRY, VERTICAL INTEGRATION, DIVERSIFICATION, CONTESTABLE MARKET.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
The study presented an explicitly dynamic model of entry in which the incumbent acted as a Stackelberg quantity leader toward a potential entrant, who chose output on the basis of expected post-entry profit.
An incumbent offers to form a strategic alliance with a potential entrant, which takes the form of the incumbent willing to share its facility with the potential entrant in order to discourage the potential entrant from building its own facility and entering on a larger, more competitive scale.
With no constraint from a potential entrant, the ability and incentive of Grab to exercise its market power to the detriment of ride-hailing passengers is even stronger.
In some cases, the manufacturers of the patented products have settled with the potential generic entrant and agreed to share the profits from the patented product, sometimes for a period of years, if the potential entrant will delay production of a generic competitor.
It also makes the stock a "potential entrant" to the MSCI emerging market index possibly in the near future.
When analyzing mergers between an incumbent and a recent or potential entrant, to the extent the Agencies use the change in concentration to evaluate competitive effects, they will obviously do so using projected market shares.
Thus, the incremental cost, as seen by a potential entrant, includes the full amount of sunk costs, which is a bygone to the incumbent.
Once a potential entrant is successfully barred from a market, existing players are free to revert to their prior anti-competitive conduct.
The world-renowned SRI (Social Responsibility Investment) research company, the SAM Group, evaluates each potential entrant in collaboration with PricewaterhouseCoopers.
We consider an innovator (Firm 1) and a potential entrant (Firm 2).
A new competing product may or may not be discovered, depending on the amount of R&D investments incurred by the incumbent and a potential entrant. If the incumbent is successful, he becomes multi-product monopolist, a situation often referred to as brand proliferation.

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