Predatory pricing

• What is predatory pricing designed to achieve?

  Force competitors out
• Predatory pricing involves setting prices below cost
• Businesses using predatory pricing typically have significant market power and resources.
• Steps of predatory pricing strategy

  1️⃣ Prices are set below cost

  2️⃣ Competitors are forced out of the market

  3️⃣ The predator increases prices above cost

  4️⃣ The predator earns higher profits
• Predatory pricing is illegal in the UK
• Competitive pricing and predatory pricing are the same thing.

  False
• What happened in the bus market in Darlington as an example of predatory pricing?

  Operators cut prices below cost
• Predatory pricing creates a barrier to entry
• Predatory pricing can lead to higher profits for the remaining monopolist.
• Why is predatory pricing considered anti-competitive?

  It eliminates competitors
• Businesses engaging in predatory pricing in the UK face significant fines
• Match the characteristic of predatory pricing with its description:

  Below-cost pricing ↔️ Prices are set below the cost of production

  Monopoly creation ↔️ Eliminates competition and creates a monopoly

  Illegal activity ↔️ Prohibited under competition law

  Barriers to entry ↔️ Discourages new competitors from entering the market
• What is the long-term sustainability of predatory pricing as a strategy?

  Not sustainable
• Predatory pricing is a legal and ethical business strategy.

  False