What is a series of competitive price cuts that lowers the market price below the cost of production called?

History

2 answers:

wolverine [178]3 years ago

7 0

Price war. I hope this helps.

telo118 [61]3 years ago

7 0

The correct answer is: "a price war"

A price war is a competitive strategy started typically by a strong firm, which has already reached economies of scale in the industry and aims to kick some competitors out.

Reaching economies of scale allows the producer to manufacture the product at a lower cost per unit, and to charge a lower market price for it, if compared to other firms that have not such production advantage. Therefore, the strong competitor can charge a market price which is smaller than the cost per unit beared by its competitor, who would be unable to make profit in this scenario because all the consumers would prefer the cheaper option.

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