Which of the following is evidence of predatory pricing? Predatory: Driving out domestic and other competitors in the targeted market by knocking down prices. Sporadic: The occasional sale of goods at cheap prices in foreign markets to combat a temporary surplus of production back home. What is the difference between predatory pricing and dumping? In Oklahoma, Wal-Mart faces a private lawsuit alleging similar illegal pricing practices. Government officials in Wisconsin and Germany accused the retailer of pricing goods below cost with an intent to drive competitors out of the market. In September, Wal-Mart was hit with three separate charges of predatory pricing During its first six years, Amazon lost billions of dollars selling books below cost, a strategy that drove many bookstores out of business. It’s unethical in part because it is pricing to hurt competitors, not to help consumersĢ1.0 similar questions has been found Does Amazon use predatory pricing?Īmazon has consistently engaged in predatory pricing - selling products and services below cost to kill off competitors and expand its market share. The concept is that a business that engages in predatory pricing could force its competitors to close and thus create a monopoly. It is also called competitive pricing as it enables the forms to wipe out competition from the market. Explanation : Predatory pricing is a pricing strategy that is aimed at current and potential clients. Predatory pricing is a method of pricing in which the company change low prices to eliminate the competition. To that end, most forms of predatory pricing are illegal. Antitrust laws are designed to preserve market competition and minimize monopoly power. Why would a company use predatory pricing?īecause predatory pricing is designed to drive other competitors out of the market, it is typically viewed as an attempt to gain an illegal monopoly. Predatory pricing is a strategy adopted to enhance market power. Predatory pricing is a strategy that entails a temporary price below the cost of production in order to injure competition and thereby reap higher profits in the long run. This is illegal in many countries and is treated very harshly by many justice systems. If you had a competitor that was selling a TV at $100, and you sold the same TV at $80 (while taking a loss) because you knew they couldn’t beat your price, you’re inacting in predatory pricing. In most general terms predatory pricing is defined in economic terms as a price reduction that is profitable only because of the added market power the predator gains from eliminating, disciplining or otherwise inhibiting the competitive conduct of a rival or potential rival.
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