Definition of Limit Pricing
It’s when a supplier decides to sell an item at a cost that’s so low that it doesn’t allow competitors in because they wouldn’t be able to make any money. It’s typically lower than the mean expenses to produce it.
Description of Limit Pricing
Here, you don’t focus on pricing your item in a way that you’ll make the most money, but in a way where you won’t give any companies the ability to compete with you.
Advantages of Limit Pricing
This method helps you eliminate or greatly decrease the amount of competition that you have.
Disadvantages of Limit Pricing
For one, it is illegal in a few government jurisdictions, so you may not even want to attempt it. If you do choose to do so, you may struggle with adjusting your structure when you do eventually get a rival. You’ll also need to make sure that you’re still overseeing the quality of your item or else someone could kick you out of your position with something better and of more quality.