What is the definition of predatory pricing?

The definition of predatory pricing is accurately captured by the choice that describes setting very low prices to eliminate competition. This strategy is employed by a business to attract customers away from competitors by severely undercutting their prices, which may result in the competitor’s inability to sustain their market share.

The aim of predatory pricing is often to establish a monopoly or dominant position within the market; once the competition has been driven out, the company can later raise prices without fear of losing customers to former competitors. This practice can be detrimental to the market as a whole, leading to reduced competition, innovation, and ultimately harming consumers in the long run.

The other choices do not align with the definition of predatory pricing. High pricing strategies relate to premium products, and discounts for loyal customers are ways of fostering customer loyalty rather than eliminating competition. Lastly, charging different prices based on customer demographics is more related to price discrimination, which differs significantly from the concept of predatory pricing focused on undermining competitors.