![]() Potential new entrants are reluctant to enter the market.Predators cut prices to very low levels so that: ![]() The main motive of large companies implementing this pricing strategy is to drive competitors out of the market. The high-cost structure makes it difficult for them to sell products at a loss. Hence, such advantages enable them to drop prices. Also, they enjoy a low-cost structure due to economies of scale and economies of scope. A substantial market share allows them to have a significant market power to influence the market. They can offer products and services at prices far below market norms. ![]() Large companies are more likely to use this strategy. One indication of this practice is pricing below average variable costs. Thus, differentiating fair competition from predatory pricing is debatable. Setting low prices is a consequence of increased competition in the market. In some countries, this practice is illegal, even though it is difficult to prove. The aim is to eliminate competition in the market. Predatory pricing is a strategy in which companies set prices very low, far below normal. ![]()
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