Definition
- Predatory pricing
- Predatory pricing is when a firm cuts its prices sharply, often below its own average cost, or threatens to, so that rivals are driven out or deterred from entering.
Example
Can you think of an example of predatory pricing?
A large airline slashes its fares on a route the moment a small start-up begins flying it, so the newcomer cannot make money, then raises them again once it has gone.
Test yourself
Can you name five barriers to entry?