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MENTAL MODEL · M0125

Predatory Pricing

Predatory Pricing
BusinessHigh supportEconomics
Included
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Version 1.0.0 · Updated 2026-07-28

CORE DEFINITION

Predatory pricing, also known as price slashing, is a commercial pricing strategy which involves reducing the retail prices to a level lower than competitors to eliminate competition. Selling at lower prices than a competitor is known as undercutting. This is where an industry dominant firm with sizable market power will deliberately reduce the prices of a product or service to loss-making levels.

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Predatory pricing, also known as price slashing, is a commercial pricing strategy which involves reducing the retail prices to a level lower than competitors to eliminate competition. Selling at lower prices than a competitor is known as undercutting.

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An incumbent or dominant firm deliberately sells at a loss in the short term to drive out competitors with higher marginal costs or weaker financial resources. Once the market is cleared and a monopoly is established, the firm raises prices to recover previous losses and compensates with monopoly profits. This strategy requires the ability to sustain losses, the capability to force competitors out, and the ability to raise prices later without being deterred by new entrants.

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Source support: Explicit

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    en.wikipedia.orghttps://en.wikipedia.org/wiki/Predatory_pricingZH · Explicit
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