What is the predatory price?

Predational prices is a practice in which the company attempts to get control over the market reduction at the level of levels significantly below the level of competitors, so these competitors will cease from business because these prices cannot correspond or cannot maintain reduced prices because they lack capital. This tactic is illegal in many regions of the world, although it can be very difficult to prove that society is really involved in predatory prices. Some economists have suggested that this practice is largely theoretical and that very few companies have actually been involved.

In order to use predatory prices as a business tool, the company must be strong enough to bring a loss for products it sells at a low price for a longer period of time. Many companies lack financial support that can do, which can make this tactics a risky gambling. Companies also have to rely on the assumption that competitors will not return to the market as soon as prices are raised to normal levels.

This practice works in many ways. Custom prices usually maintain new competitors outside the market because they cannot hope that they will correspond artificially with the low prices that have been created, and practice also pushes existing companies from the market by reducing prices above the point they can balance. In some cases, the company can expel other companies from business and then obtain their facilities, employees and/or equipment to prevent them from returning to industry.

One of the classic examples used to illustrate predatory prices is the replacement of a chain café, which opens across the street from the local café. Theoretically, the prices in both stores should be similar, as basic coffee, pastries and other products will be similar. However, the chain can rely on its company support for support and make decina radically lower prices, attract customers to their facilities, and finally balance the competition from business.

Critics of predatory prices theory claim that companies that seem to be involved in this practice are really competing openly and fairly on the market. For example, in the above example, the chain café does nothing illegal, but it only makes the calculated business decisions to capture more market share and rely on resources that they have to support in a few months when income can be slightly lower than required.