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Term: Predatory pricing
Definition: Predatory pricing is when a company sells their products or services at a price that is lower than their cost, with the intention of getting rid of their competitors and reducing competition in the market. This is not fair competition and can be illegal.
For more information on predatory pricing and other unfair business practices, see Antitrust laws.
Predatory pricing
Predatory pricing is when a company sets their prices below the cost of production in order to drive out competitors and reduce competition in the market. This is often done with the intention of gaining a monopoly or dominant market position.
One example of predatory pricing is when a large retail chain sets their prices so low that smaller, independent stores cannot compete and are forced to close. Another example is when a new company enters a market and sets their prices so low that established companies cannot compete and are forced out of business.
For instance, Amazon has been accused of predatory pricing in the past. They have been known to sell products at a loss in order to gain market share and drive out competitors. This has led to criticism from some who argue that Amazon's practices are anti-competitive and harmful to small businesses.
Predatory pricing is a strategy used by companies to eliminate competition and gain market power. By setting prices below the cost of production, companies can force their competitors out of business and gain a larger share of the market. This can be harmful to consumers in the long run, as it can lead to higher prices and reduced choice. It is important for regulators to monitor markets and prevent companies from engaging in anti-competitive practices like predatory pricing.