Reference no: EM133130155

One of the critical condition defining perfect competition is free entry and exit for both customers and producers. That is, no market player faces any barrier to enter or exit the market.

In class, we provided some examples of barriers to enter/exit.

(a) Entry barriers for customers. For example, to become an Master student at Harvard it is not enough to pay a tuition: one has to go through the admission process implying that, at the end, Harvard selects their customers.

(b) Exit barriers for customers. Some long-term contracts between provider and customer impose exit fees. This is a common practice in the telecom industry where mobile service providers charge fees for exiting a long-term contract.

(c) Entry barriers for producers. Some industries require government license to legally operate. For example, to open a bank, insurance company, or hospital, a producer must be certified by the relevant regulatory body.

(d) Exit barriers for producers. Exiting industries with specialized assets might be difficult, if not impossible, as there might be no buyer for the assets. For example, think about nuclear plant. In this exercise, I would like you to provide an example for each of the following. (One example per category is enough.)

(a) Entry barriers for customers.

(b) Exit barriers for customers.

(c) Entry barriers for producers

(d) Exit barriers for producers.

Importantly, I would like your examples to come from the Saudi economy. It would be great, but is not a must, if you write about barriers that you have encountered in your professional career.

For each example, make sure that a reader is convinced that your example fits a particular category.