Question

If a company has been found guilty of using _______________________________________, it means it reduced prices below cost in order to drive competitors out of the market, and then increased prices once competitors had left the market.

Answer 1

Answer: Predatory pricing

                         

Explanation: In simple words, predatory pricing refers to the pricing strategy under which an organisation tries to create a certain level of monopoly by reducing their prices with the objective of demolishing competitors.

Such kind of pricing is generally seen in monopolistic competition where the products offered by competitors are close substitutes. Wall mart is one of the prime examples of an entity using such strategy.

   Firms practicing this strategy usually have strong funds and are capable of operating business for a specified period at lower profits.