chapter  1
14 Pages

Barriers to Entry

ByDominick T. Armentano *

The logic of free-market monopoly theory is said to be enhanced by a discussion of non-legal barriers to entry. Antitrust enthusiasts argue that the extra costs associated with product differentiation tend to restrict market entry. From the perspective of antitrust critics, it is entirely appropriate that efficiency and revealed preferences should limit entry and exclude potential rivals, for resources are scarce and have alternative uses. Competition is not restricted by efficiency and consumer choice. The essential confusion-and it recurs often in antitrust economics-is over the meaning of the term "competition". Non-legal barriers to entry cannot rationally support free-market monopoly theory or justify antitrust intervention. Business experience, economies of scale, advertising efficiencies, successful product innovation, and dozens of other competitive advantages that business organizations earn may well inhibit the entry of would-be suppliers, do not injure consumers, and do not reduce competition in the marketplace.