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It's well established that high barriers to entry reduce competitive pressures on margin. If nothing else, it discourages outsiders from trying out new business models that drive down prices, because it increases the amount of capital necessary to test out a new approach (and the capital is harder to raise if you're using a new strategy.)

Consider Uber vs taxis - if there were massive entry costs to the cab / private car category, a company like Uber would have trouble raising enough money to get launched. So the existing cabs wouldn't ever experience the competitive pressure from Uber, because it would never enter the market.




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