Question

It is generally accepted that predatory pricing is contentious with respect to policy implementation.

A) Describe the historical policy approach(es) to predatory pricing, then describe how tests for predation have evolved.

B) Explain why there is no generally accepted test(s) for predatory pricing. In your explanation, describe the characteristics of predation that contribute to the nonconvergence (between jurisdictions) of policy enforcement.

C) Describe some of the proposed tests for predation. Do you endorse the use of any tests? Why or why not?

Answer 1

a)Predatory pricing is the illegal act of setting prices low in an attempt to eliminate the competition. however allegations of this practices can be difficult to prosecute because may defeandats may successfully argue that lo prices are a part of normal competition , rather than deliberate attempt to determine the under market place ..

b)

In the short-term, it is the consumer who is the winner. The rival companies keep on reducing the prices of its products, and the consumer can purchase the products or services from whichever company he thinks is cheaper.

As the buyer has no loyalty towards a particular brand, it easily purchases from the cheapest one. This is a terrible move for the other participants in this war who are unable to maintain such a dramatic lowering of prices.

Long-term Effects

Although the customers are the winners of round one in the predatory pricing war in the long-term, they are the ones who will have to handle the after-effects of the war.

After most or sometimes all other rivals are driven out the company that adopted a predatory pricing strategy raises the prices of the products to recoup its loss.