Been reading you for a little while now and I love that you are able to tackle these questions with clarity and without dropping the econ speak.
I completely agree that "what are the forces that push toward quicker or slower entry" is definitely the big deal, and I can't emphasize that enough. We can moralize all we want about "good" (marketing professor: "a strong brand will make it harder for new companies to open their doors and sustain competition, so you should invest in it!") and "bad" (econ professor: "exclusive dealing contracts can make it impossible for a potential competitor to enter") barriers to entry since the term has connotations, but if you parse it into three words to address it analytically rather than morally, it's just one side of a coin: what are the barriers that exist in the way of entry, and what are the facilitators that exist for entry?
If you get bogged down in the morality, facilitators of entry, too, can be pernicious - if the government subsidizes the production of a product, perhaps especially for businesses with small headcounts or those who just incorporated in the last year, that's a huge facilitator of entry. The subsidy could even just be a giveaway and not supportive of any particular societal need. It might not even increase competition (read: lower prices or markups) if new companies are affiliated with each other or even without collusion converge on a normative price that is obvious from the clear math enabled by the policy. But all of this is really beside the point, because the question is: does it facilitate or hinder *entry*? If we want to answer other questions, we can ask them, but entry becomes only a plausible mechanism with implications for other things that we know affect entry but hadn't thought about affecting these other outcomes, and not the outcome of interest itself. Rather, I suggest if we have a question about entry, let's just come at it head-on, but drop the moral connotations.
Property rights is a pretty neutralizing frame to help us out, but even then there's the moral question of who deserves what property rights - in Coaseian bargaining, initial assignment shouldn't matter economically, but we know it does (see reclining airplane seats). You also see this with theft - legalizing theft would be a great facilitator of entry for you but it is morally off-limits, so you reject labeling it further because to do so would offer some legitimacy of it being in the toolbox. I'd say the simplest analysis that one can do about whether something affects entry is to assess...whether and how it affects entry. For theft, turns out it would be a huge detriment to entry for most (I'm not going to enter if it makes me a target). Figuring out the overall effect would help us categorize it. Another problem with the mere property rights labeling approach is that without considering effects on things, it is just an academic question with a dead end for policy: the established firm has a property interest in its contract with the best manager. That's a cool construction of the situation, but what does that mean? We have to start linking it to outcomes of interest and we will see that constraints in a heterogeneous supply of managers can restrain entry (I won't put up the capital to open a restaurant with no suitable manager available, or I won't open the restaurant if the cost of buying out the contract is too high). Is it a "barrier to entry?" We don't want to say so. Does it reduce entry (...what we might call a barrier to entry)? Simply, yes.
Is a form to incorporate as an LLC a barrier to entry? If it's just a moral judgment, this is a "fine" barrier so "no, it's not a 'barrier to entry,'" but if we're assessing the sign of its effect on entry, it is definitely a barrier, just not a big (magnitude of effect) one. Sign and magnitude, baby!
Been reading you for a little while now and I love that you are able to tackle these questions with clarity and without dropping the econ speak.
I completely agree that "what are the forces that push toward quicker or slower entry" is definitely the big deal, and I can't emphasize that enough. We can moralize all we want about "good" (marketing professor: "a strong brand will make it harder for new companies to open their doors and sustain competition, so you should invest in it!") and "bad" (econ professor: "exclusive dealing contracts can make it impossible for a potential competitor to enter") barriers to entry since the term has connotations, but if you parse it into three words to address it analytically rather than morally, it's just one side of a coin: what are the barriers that exist in the way of entry, and what are the facilitators that exist for entry?
If you get bogged down in the morality, facilitators of entry, too, can be pernicious - if the government subsidizes the production of a product, perhaps especially for businesses with small headcounts or those who just incorporated in the last year, that's a huge facilitator of entry. The subsidy could even just be a giveaway and not supportive of any particular societal need. It might not even increase competition (read: lower prices or markups) if new companies are affiliated with each other or even without collusion converge on a normative price that is obvious from the clear math enabled by the policy. But all of this is really beside the point, because the question is: does it facilitate or hinder *entry*? If we want to answer other questions, we can ask them, but entry becomes only a plausible mechanism with implications for other things that we know affect entry but hadn't thought about affecting these other outcomes, and not the outcome of interest itself. Rather, I suggest if we have a question about entry, let's just come at it head-on, but drop the moral connotations.
Property rights is a pretty neutralizing frame to help us out, but even then there's the moral question of who deserves what property rights - in Coaseian bargaining, initial assignment shouldn't matter economically, but we know it does (see reclining airplane seats). You also see this with theft - legalizing theft would be a great facilitator of entry for you but it is morally off-limits, so you reject labeling it further because to do so would offer some legitimacy of it being in the toolbox. I'd say the simplest analysis that one can do about whether something affects entry is to assess...whether and how it affects entry. For theft, turns out it would be a huge detriment to entry for most (I'm not going to enter if it makes me a target). Figuring out the overall effect would help us categorize it. Another problem with the mere property rights labeling approach is that without considering effects on things, it is just an academic question with a dead end for policy: the established firm has a property interest in its contract with the best manager. That's a cool construction of the situation, but what does that mean? We have to start linking it to outcomes of interest and we will see that constraints in a heterogeneous supply of managers can restrain entry (I won't put up the capital to open a restaurant with no suitable manager available, or I won't open the restaurant if the cost of buying out the contract is too high). Is it a "barrier to entry?" We don't want to say so. Does it reduce entry (...what we might call a barrier to entry)? Simply, yes.
Is a form to incorporate as an LLC a barrier to entry? If it's just a moral judgment, this is a "fine" barrier so "no, it's not a 'barrier to entry,'" but if we're assessing the sign of its effect on entry, it is definitely a barrier, just not a big (magnitude of effect) one. Sign and magnitude, baby!