Predatory pricing

In business and economics, the practice of selling a product or service at a very low price, with the intention of expelling competitors out of the market, or creating entry barriers for potential new competitors, is known by the name of predatory prices.

If current or potential competitors can not sustain equality or lower prices without losing money, they go bankrupt or decide not to enter the business. The predatory trader then has fewer competitors or even de facto has a monopoly, and could hypothetically raise prices above what the market should bear.

Critics of the concept argue that it is a conspiracy theory, that “almost no” economist believes that the theory behind this concept (although some believe it is theoretically possible, based on models, there is virtually no one who has recreated it) is an empirical phenomenon, and that there are no known examples of a company that has raised prices after beating all possible competition.

In many countries “predatory prices” are considered anti-competitive and it is illegal under the defense of competition. In general, it is difficult to prove that prices fell deliberately due to predatory pricing or legitimate price competition. In any case, competitors can be expelled from the market before the case is heard and dealt with.

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