What does predatory pricing involve quizlet?

Predatory Pricing. Practice that involves charging a very low price for a product with the intent of driving competitors out of business. It is illegal under the Sherman Act and Federal Trade Commission Act. Price Discrimination.

What is predatory pricing?

Predatory pricing is the illegal act of setting prices low to attempt to eliminate the competition.

What is example of predatory pricing?

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. This is illegal in many countries and is treated very harshly by many justice systems.

Why do companies use predatory pricing?

In many industries, larger companies will use a strategy known as “predatory pricing” where they drop their prices to eliminate smaller companies and grab more market share. … When the competition is eliminated, prices will probably go up again.

How is predatory pricing determined?

Competition Act 2002 says that “predatory price” means the sale of goods or provision of services, at a price which is below the cost, as may be determined by regulations, of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors[xviii].

How do you deal with predatory pricing?

How to Avoid a Price War
  1. Critically Evaluate Competitors’ Actions Before Reacting. …
  2. Selectively Communicate Your Strategy. …
  3. 5 Steps to Improve your Pricing Strategies. …
  4. Build Strong Information on Your Customer’s Price Sensitivity. …
  5. Be Consistent & Quick With Your Responses. …
  6. Manage Your Company’s Capacity Carefully.

Is predatory pricing ethical?

Predatory pricing is pricing a product lower than the competition in the hopes of driving that competition out of business. … Either way, it’s unethical in part because it is pricing to hurt competitors, not to help consumers.

How does predatory pricing affect a company’s market power?

Predatory pricing practices may result in antitrust claims of monopolization or attempts to monopolize. Businesses with dominant or substantial market shares are more vulnerable to antitrust claims.

Why is predatory pricing bad?

The more rare predatory pricing is, the more likely it is that successful prosecutions of alleged predatory pricing are unwitting attacks on healthy price competition. This would hurt consumers and some of the most-efficient firms. … The classic alleged case of predatory pricing was that of Standard Oil of New Jersey.

What is unethical about predatory pricing?

Predatory pricing is deemed illegal and anti-competitive in many countries. … Allegations of wrongdoing are often hard to prove, as firms can claim they were merely trying to be competitive with their pricing, rather than deliberately acting to drive out their competition.

Does Walmart use predatory pricing?

In September, Wal-Mart was hit with three separate charges of predatory pricing. 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 Oklahoma, Wal-Mart faces a private lawsuit alleging similar illegal pricing practices.

Is Amazon predatory pricing?

Amazon has consistently engaged in predatory pricing — selling products and services below cost to eliminate off competitors and expand its market share. During its first six years, Amazon lost billions of dollars selling books below cost, a strategy that drove many bookstores out of business.

Is Uber predatory pricing?

Sidecar alleges that Uber has engaged in predatory pricing on each of the two “sides” of the ride-hailing market, offering above-market incentive payments to drivers, and offering below-market fares to passengers.

Who uses predatory pricing?

Definition of Predatory Pricing

Predatory pricing occurs when a firm sells a good or service at a price below cost (or very cheaply) with the intention of forcing rival firms out of business. Predatory pricing could be a method to deal with new firms who enter an industry.