What is a potential consequence of high barriers to entry?

High barriers to entry are significant obstacles that make it difficult for new firms to enter a particular industry or market. When these barriers are high, it often results in a situation where fewer new competitors can enter the market, leading to reduced competition. This can be due to various factors, such as high capital requirements, stringent regulatory standards, or established brand loyalty that existing firms enjoy.

The lack of new entrants means that the current firms face less pressure to innovate or enhance their offerings, which can lead to stagnation in product development and potentially higher prices for consumers. In many cases, established companies may even gain greater market power, enabling them to set prices above the competitive level and affecting overall market efficiency. Thus, the consequence of high barriers to entry is principally characterized by a reduction in competition within the market.