costs of exit: Sunk costs. Barrier to exit for incumbent firms since the committed assets represent non-recoverable costs. Examples of sunk costs including assets specificity, advertisement campaigns and promotions, research and development costs, and prepaids. Long-term contracts. Some long-term contracts with buyers or suppliers can be barriers to exit as the penalty for not fulfilling the contracts may be costly. Other factors that may form a barrier to exit include: Potential upturn. Firms may be influenced by the potential of an upturn in their market that may reverse their current financial situation. Government and social restrictions. Often based on government concerns for job losses and regional economic effects. Loss of customer goodwill Costly Equipment which requires a large investment up front that can only perform very specific tasks Relationship between barriers to exit and barriers to entry Eaton and Lipsey (1980) pointed out that barriers to exit are barriers to entry. Barriers to exit are obstacles or impediments that prevent a company from exiting a market or industry. These are common occurrences that typically only delay an exit, and they often have simple solutions. There are two reasons to believe that such interdependence exists. Both reasons are related to new entrants and incumbents. First-mover advantages. Investments by incumbent firms in durable and specific assets may create first-mover advantages, this create barrier to entry for new entrants. It also limits the potential for displacement. Sunk costs. Sunk cost is barrier to entry, and it provides incumbents with an advantage. Sunk cost is also barrier to exit since the sunk cost represent non-recoverable costs. Implications As more firms are forced to stay in a market, competition increases within that market. This negatively affects all firms in the market and profits may be lower than in a perfectly competitive market. "High barriers to exit might hurt existing companies but might also create opportunities for new companies looking to enter the sector." Competitive markets create barriers to entry and exit, but the high barrier of exit to leave a market can create circumstances that open up the market for new firms that could not afford the high cost of entry prior to the existing firm's exit. Examples Exit barriers are especially high in the airline industry. Passenger airplanes are specialized assets in the airline industry because passengers airplanes have no use in other markets. Due to the dramatically decreasing demand for air-travel due to