Entry Barriers – Contrived Deterrence
Party 1 (Positive) : Incumbent firm
Party 2 (Negative) : Competitors
Type of asymmetry : Structural asymmetry of the market conditions
Source of asymmetry : Exploitation of price structures and market power as a result of prior experience in the market. This places new firms at a disadvantage as a result of uncertainty.
Barriers to entry
Party 1 (Positive) : Incumbent firm
Party 2 (Negative) : Entrant
Type of asymmetry : Monopoly Power with an effective barrier to entry
Source of asymmetry : Incomplete information as a result of an entrant’s inability to gain an accurate a full insight of the actual market conditions such as cost conditions and actual demand.
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Resource-Based View of the Firm
Party 1 (Positive) : Existing firm
Party 2 (Negative) : New competitors
Type of asymmetry : Resource heterogeneity and immobility
Source of asymmetry : Competitive advantage based on a firm’s ability to control its dominance in the market by utilizing its resources and exploiting opportunities to maximize profits.
Customer Captivity
Party 1 (Positive) : Seller
Party 2 (Negative) : Buyer
Type of asymmetry : Control of Price and quality of the product
Source of asymmetry : Even though many customers tend to buy products with the lowest price, the quality of the item will determine its worth in the market. A company with a good reputation that offers quality goods will, therefore, record more sales as compared to other competitors.
