Introduction

The structure of Chapter 5 varies from the previous ones in this book. This is due to the 80s being a convulsive moment for the analysis of barriers to entry. First, owing to a survival of the old barriers, while some of them were analysed with the Bain-Sylos-Modigliani's model others were confirmed under the lens of a new paradigm: the game theory. Altogether, new advances were tested during this decade in the field of entry. In order to a better illustrate the Industrial Organization theory, it is convenient to introduce three main methodological branches: strategy competitive; contestable markets; and game theory. While barriers have been also divided in traditional branches; they are the same than in the last chapter: excess of capacity, industrial concentration and advertising. Entry models have an independent section as usual. The evolution of the analysis of barriers to entry will be analysed following a chronological order, which allows us to show, at the same time, the analytical change from limit price theory to game theory.

During the 80s two new branches in industrial organization emerged, perhaps following the old controversy between the Harvard and Chicago Schools. Contestable markets theory appears as a new economic framework to improve the market theory traditionally following the path of Chicago School. Strategic competitive is closer to the Structure-conduct-performance paradigm, or Harvard School. The controversy about barriers to entry continued, and the prevalence of long-run profits are the issue for discussion. The other point of disagreement relates to the use of statistical information, in particular the cross-section data; this subject shall not concern us any further for the time being.