cteristics which will permit it to compete with firms already participating in the market. Thus, the costs associated with the acquisition of patent licenses, specialized equipment, economies of scale production facilities, and skills both managerial and production may be cost barriers to entry into a market (Walter and Smith, 1989).
2. Product differentiation barriers. Product differentiation barriers to entry are the advertising expenditures required for a new market participant to persuade buyers that its products are somehow different from those products already available in the market (Waterson, 1985). Such advertising must not only persuade buyers that the new firm's products are different from those already available, but that, because of such differences, they are worth buying in preference to the currently available products. The costs associated with such advertising may be sufficiently high as to constitute a product differentiation barrier to entry into a market. 3. Legal barriers. Legal barriers to market entry are laws related to zoning, patents, franchising, licensing, and other factors. Some governmental jurisdictions, as an example, limit the absolute number hospital beds, taxi cabs, taverns, and other types of businesses which will be permitted to exist within the jurisdiction. Other governmental jurisdictions establish monopolies in some markets. In some cases, such as package liquor sales, the monopoly may be operated by the government, while in others, the monopoly may be established as a publicly regulated utility, such as a local telephone service, or a local electrical power supply service. Legal barriers are the most powerful barriers to market entry, because they may not be breached, regardless of the willingness of a new firm to attempt to overcome any cost or product differentiation barriers to market entry which may exist. In the United States, federal law has acted as a barrier to entry in...