Asked by Hadeel Damra on Jun 25, 2024
Verified
Legal restrictions
i. Define predatory pricing.
ii. Assume a firm has been charged with predatory pricing. What is the role of product-cost information in defending the firm's pricing practices?
Predatory Pricing
A strategy where a business sets prices below cost intending to eliminate competitors and gain market dominance.
Product-Cost Information
Data regarding the total costs incurred in the creation of a product, including direct materials, labor, and overhead expenses.
- Recognize the legal and economic implications of predatory pricing.
Verified Answer
ZK
Zybrea KnightJul 02, 2024
Final Answer :
i. Predatory pricing occurs when a company attempts to eliminate or substantially damage a competitor by reducing the price of its goods or services to a very low level. Such pricing may also be undertaken to prevent the entry of a competitor into a market.
ii. The product cost information would be analysed by the ACCC to determine if the company that holds a substantial share of a market was selling below cost. This would assist the ACCC to determine if the company was being anti-competitive or increasing its market share.
ii. The product cost information would be analysed by the ACCC to determine if the company that holds a substantial share of a market was selling below cost. This would assist the ACCC to determine if the company was being anti-competitive or increasing its market share.
Learning Objectives
- Recognize the legal and economic implications of predatory pricing.