Entry or potential entry of new firms into a market can erode the market power of existing firms
BARRIERS TO ENTRY
Entry or potential entry of new firms into a market can erode the market power of existing firms by increasing the number of substitutes. Therefore, as a general case, a firm can possess a high degree of market power only when strong barriers to the entry of new firms exist. A strong barrier to entry exists when it is difficult for new firms to enter a market where existing firms are making an economic profit. Strong barriers to entry hinder the introduction of new, substitute products and protect the profits of firms already in the market.
Answer preview Entry or potential entry of new firms into a market can erode the market power of existing firms
APA
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