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Predatory (or destroyer) pricing

setting a price at such a low level with a view to forcing rival firms out of the market. It also creates barriers to entry for potential new competitors. If existing competitor or new competitors cannot match or sustain the lower price then they may lose customers as a result and, ultimately, go out of business, or choose not to enter a market. The ‘predator’ then has fewer competitors and, thus, increased sales and market share than previously. One of the drawbacks of such a strategy is the fact that profit is sacrificed – in the short-term. Predatory (or destroyer) pricing is common to competitive markets dominated by a few large firms (oligopoly). It is against ‘anti-competitive’ legislation, but it can be hard to prove that prices were dropped as a deliberate move to force competitors out of the market.

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