In economics, barriers to exit are obstacles in the path of a firm that wants to leave a given market or industrial sector.
If the barriers of exit are significant, a firm may be forced to continue competing in a market.
[2] In 1976, Porter defines "exit barriers" as "adverse structural, strategic and managerial factors that keep firms in business even when they earn low or negative returns.” [3] In 1989, Gilbert used the definition “costs or forgone profits that a firm must bear if it leaves the industry...Exit barriers exist if a firm cannot move its capital into another activity and earn at least as large a return”.
As an illustrative example, suppose Delta Air Lines wants to exit its business but has a significant amount of debt owed to investors.
As a result, Delta might have a difficult time finding a buyer for the planes, leaving them unable to payoff the debt and exit the industry.
The most feasible solution would be to find a competitor in the industry that had the capital to buy the fleet or opt to request financial assistance from the government.
"[5] In this instance, despite the bank wanting to leave the market, governmental regulations place a barrier to exit.
Leaving the Apple platform of technology would cause a customer to lose all of their downloaded content, including music, movies, applications, games, and more critical date such as virtual panic buttons or schedules.