Barriers to Entry into the Market - Essay Example

Forrest survives a storm and his boat is the only one remaining for fishing. Considering no other fishers can operate because of a lack of machinery, Forrest enjoys a monopoly market because they had the only available boat, yet the demand for shrimps was still considerably high. Naturally, the fishing industry subsists in perfect competition, in which there is little economic profit for players. Forrest can charge a high price for the shrimps and enjoy the maximum economic benefit. Potential competitors in Forrest’s monopoly market face a barrier to entry in terms of high fixed cost versus small margins, and high capital requirements (Dilek and Colakoglu, 2013). They will have to use some money and time before recovering and making sales.

Barriers to entry are conditions that stop or obstruct a potential competitor's ambition to participate in the market. Several barriers to entry exist in other industries that allow certain firms to operate as a monopoly. Legal restrictions and licensing requirements from the government can restrict domestic or international competition (Dilek and Colakoglu, 2013). In addition, brand loyalty provides a barrier to entry, for instance, through product differentiation. It is difficult for people to compete with a valued brand like Coca-Cola. The ability to control natural resources is another barrier to entry that facilitates a monopolistic market (Dilek and Colakoglu, 2013). For example, diamond-mining companies, such as De Beers, keep the value of diamonds high because they allow only limited mining of natural resources.