Definition of Predatory Pricing
In this pricing strategy, your goal is to attempt to get rid of rivals or give new ones a huge obstacle by making your prices low.
Description of Predatory Pricing
It begins with a gradual price decrease, which may occur in a price war. It's actually illegal in quite a few countries under competition laws, but it’s often hard to tell whether it’s an actual rivalry. It’s is a price that is less than incremental marginal price of making an item.
Advantages of Predatory Pricing
It’s one way that you can eliminate new companies from joining the market, which ultimately helps lessen the amount of competition. You may even end up holding the dominant market position.
Disadvantages of Predatory Pricing
There’s a chance that it’s illegal. However, if you do pursue it, there’s no guarantee that it’ll help you for long because rivals will still eventually figure out how to dig into the market.