Economics » Monopoly » How Monopolies Form: Barriers to Entry

Summing Up Barriers to Entry

Summing Up Barriers to Entry

This table lists the barriers to entry that have been discussed here. This list is not exhaustive, since firms have proved to be highly creative in inventing business practices that discourage competition. When barriers to entry exist, perfect competition is no longer a reasonable description of how an industry works. When barriers to entry are high enough, monopoly can result.

Barriers to Entry

Barrier to EntryGovernment Role?Example
Natural monopolyGovernment often responds with regulation (or ownership)Water and electric companies
Control of a physical resourceNoDeBeers for diamonds
Legal monopolyYesPost office, past regulation of airlines and trucking
Patent, trademark, and copyrightYes, through protection of intellectual propertyNew drugs or software
Intimidating potential competitorsSomewhatPredatory pricing; well-known brand names

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