Cutting prices to keep customers or beat competitors often encourages customers to demand price concessions.

Question

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When a company cuts its prices, it sends a message to its customers that it is willing to compete on price. This may lead customers to expect price concessions in the future, and they may become less loyal to the company if they find a better deal elsewhere. This is why price competition can sometimes lead to a race to the bottom, where all competitors end up cutting their prices to unsustainable levels.

Cutting Prices to Keep Customers or Beat Competitors Often Encourages