Which price strategy temporarily setting prices so low that competitors, especially smaller businesses, cannot compete at a profitable level?

Which price strategy temporarily setting prices so low that competitors, especially smaller businesses, cannot compete at a profitable level?

• A. Predatory pricing
• B. Penetration pricing
• C. Loss leader pricing
• D. Price wars

Answer: (A)

Predatory pricing is when a company temporarily lowers its prices to levels that are unsustainably low for most rivals, especially smaller players, with the aim of forcing them out or preventing them from competing profitably. The key idea is using price reductions to eliminate competition and then, once rivals are weakened or gone, raising prices again to regain power in the market. This combination of a short-term loss in profits and a strategic goal of reducing competition makes it distinct from other pricing moves. Penetration pricing also lowers prices to gain market share, but the goal is to establish a foothold in a market and build a sustainable position over time, not to crush competitors outright. Loss leader pricing involves pricing one or a few items below cost to attract customers, with the intention of increasing overall sales or cross-selling, rather than targeting competitors’ viability. Price wars describe ongoing price-cutting battles between firms, not a single strategic intent to eliminate competitors and later recoup losses. Predatory pricing is often controversial and may be illegal in many places because it can harm competition and consumer welfare in the long run, even though the short-term objective is to gain market dominance.

Predatory pricing is when a company temporarily lowers its prices to levels that are unsustainably low for most rivals, especially smaller players, with the aim of forcing them out or preventing them from competing profitably. The key idea is using price reductions to eliminate competition and then, once rivals are weakened or gone, raising prices again to regain power in the market. This combination of a short-term loss in profits and a strategic goal of reducing competition makes it distinct from other pricing moves.

Penetration pricing also lowers prices to gain market share, but the goal is to establish a foothold in a market and build a sustainable position over time, not to crush competitors outright. Loss leader pricing involves pricing one or a few items below cost to attract customers, with the intention of increasing overall sales or cross-selling, rather than targeting competitors’ viability. Price wars describe ongoing price-cutting battles between firms, not a single strategic intent to eliminate competitors and later recoup losses.

Predatory pricing is often controversial and may be illegal in many places because it can harm competition and consumer welfare in the long run, even though the short-term objective is to gain market dominance.