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Exploit the market situation to impose fanciful price
Achieve fictional profits
In the absence of competition
This happens a great harm to the client
Predatory pricing is legal and it is existent if not for a long time but for short term. Normally the price is reduced to the maximum to face competition. I personally feel it is not the right way to carry out a business. the right way is to give better service to your customers and face the competition.
Pricing below the cost to eliminate a competitor. Though it seems to be an advantage for consumers temporarily--they have to pay for it heavily, a little bit later. It is a restrictive trade practice, no competitor means monopoly. In the modern ages, such practices cannot be continued on an on going basis, because new entrants always looking for an opportunity to enter the market with cost reduction technologies and new marketing strategies.
Predatory pricing is a strategy by a business to set below cost product prices with an intention to drive competitors out of the market. In my opinion , it is a misuse of power by any dominating business in market and should be considered as illegal.
Predatory pricing become a common practice especially in consumer electronics during the festive seasons, most of the time we give the justification through marketing expenditure.
but you cannot be out from this practice as consumers expect the same and it really make the spike sellout.
The pricing of products in an unfair manner with an object to eliminate or retard competition and thereby gain and exercise control over prices in the relevant market.
Many economists have questioned the rationality of predatory pricing on grounds that: it can be at least as costly to the predator as to the victim; targets of predation are not easily driven out, assuming relatively efficient capital markets; and entry or re-entry of firms in the absence of barriers reduces the predator’s chances of recouping losses incurred during the period of predation.
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