What defines a barrier to entry in a market?

A barrier to entry is defined as an obstacle that hinders competition within a market. These barriers can take various forms, including high startup costs, stringent regulations, limited access to distribution channels, or strong brand loyalty among consumers. Such obstacles can deter new firms from entering the market, allowing existing companies to maintain their market share and pricing power without facing new competitors. This definition highlights how barriers to entry protect incumbents and limit the extent of competition that can foster innovation and consumer choice. Understanding these barriers is crucial for analyzing market dynamics and the reasons behind the structure of industries.