A New Measure of Minimum Efficient Plant Size in UK Manufacturing Industry

factor in studies of industrial economics since Bain's seminal work on barriers to new competition (Bain, 1956). The weight of empirical evidence (see the studies cited in Section II below) indicates that long-run average cost curves are horizontal over large ranges of output; in which case the point at which they are first minimized becomes important in determining, among other things, the barriers to entry into an industry. Four deterrent effects of minimum efficient size on entry may be identified. (a) The larger the minimum efficient plant size (henceforth, MESP) in relation to the size of the market, the greater are the difficulties of attracting enough customers away from their existing suppliers to reap full production economies. (b) For any given price elasticity of demand, an entrant will reduce the price of the product more, and/or provoke greater retaliation by existing firms, the greater is the size of his addition to productive capacity (as determined by the MESP in industry).