Predatory Pricing: Definition, Example, and Why It's Used

Predatory pricing is a pricing strategy where a company sells a product or service at a very low price in order to drive out its competitors. Once the competitors have been driven out, the company can then raise its prices and enjoy a monopoly.

Predatory pricing is illegal in most countries, but it can be difficult to prove. The government must show that the company's pricing was below its cost of production and that it had the intent to drive out its competitors.

There are a few reasons why companies might use predatory pricing. One reason is to gain market share. By driving out their competitors, companies can increase their market share and control the market. This can give them more power to set prices and make more profits.

Another reason companies might use predatory pricing is to eliminate competition. By driving out their competitors, companies can create a monopoly. This gives them the power to set prices and make more profits.

Predatory pricing can have a negative impact on consumers. It can lead to higher prices and less innovation. It can also make it difficult for new businesses to enter the market.

If you believe that a company is using predatory pricing, you can file a complaint with the government. The government will investigate the complaint and take action if it finds that the company is violating the law.