ng market demand into account will likely lead to allocative and dynamic inefficiency. The cost of providing access is not simply production cost, but also includes the value to the owner of the best opportunity foregone. Thus, access prices must include an opportunity cost component, preferably based on market prices, to reflect market demand for access. Including opportunity costs in access reflects the most fundamental economic principles. C. The Consistency between Network Costs and Market Pricing Fundamental economic principles thus indicate that efficiency would best be pro- moted if network access prices were based on the market value of the relevant inputs. If direct market-based indicia are not available, regulatory authorities should use a methodology such as ECPR that includes the direct costs as well as the oppor- tunity costs of providing the input. That said, some markets contain features that can cause them to fail to produce outcomes that promote efficiency. In particular, barriers to entry by new competitors may constitute a cause of market failure, particularly if the incumbent is a monopolist. The existence of barriers to entry can provide a monopoly incumbent with the market power to distort prices away from efficient levels. As noted in Chapter 4, some commentators have suggested Pricing of Access to Networks that network industries possess features, such as sunk costs, economies of scale and scope, and network economic effects, that may deter entry in ways that can cause market outcomes to deviate from efficient levels. The analysis that follows refutes those arguments. As a preliminary matter, the standard discussions of entry barriers assume that they are an exogenous feature of technology (Stigler 1968). In fact, companies choose their technology, by carrying out research and development and by choosing production methods and product features. Because many aspects of technology are endogenous, it is thus likely that competitors will find their way around technological impediments to entry