Principles of Microeconomics / Unit 8 MIC 0706 short lesson, about 20 seconds
Predatory Pricing and Other Intimidation
Captions available
The idea
Predatory pricing is a sharp temporary price cut meant to drive out an entrant, after which the price rises again. Heavy advertising and sunk entry costs deter rivals the same way.
In practice
An entrant that must spend heavily to be noticed loses it all on failure.
Where people slip
Predatory pricing is illegal and hard to prove: a low price can also be ordinary competition.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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