ABSTRACT
Bain [1956] identified economies of scale, product differentiation, and absolute cost advantages of established firms as the major determinants of the conditions of entry. This taxonomy provides a convenient jumping-off point for a discussion of sources of barriers to capital mobility, and we shall consider each type of barrier in turn. However, it will be evident that the extent to which these factors actually impede capital mobility depends on industry behaviour, and, therefore, that they cannot be evaluated without taking into account the strategic actions that are available to established firms. The interactions between Bain’s sources of barriers to capital mobility and firm behaviour also imply that established firms may be able to enhance the deterrence value of structural barriers to capital mobility by engaging in strategic behaviour designed to make entry more difficult. Some of the ways in which this can be accomplished, and some of the obstacles to strategic exploitation of mobility barriers, are discussed below.
