Barriers to exit

In economics, barriers to exit are obstacles in the path of a firm which wants to leave a given market or industrial sector. These obstacles often cost the firm financially to leave the market and may prohibit it doing so.

If the barriers of exit are significant; a firm may be forced to continue competing in a market, as the costs of leaving may be higher than those incurred if they continue competing in the market.

Types of exit barrier

The factors that may form a barrier to exit include:

Implications

As more firms are forced to stay in a market, competition increases within that market. This negatively affects all firms in the market and profits may be lower than in a perfectly competitive market.

See also

References