Predatory pricing will be most effective when the costs structures of the firms in an industry,including potential entrants into the market,are identical or at least very similar.

Question

Quizplus · Accepted Answer

Predatory pricing is more likely to be effective when the predator firm has a lower cost structure than its competitors. If the costs structures of all firms in the industry, including potential entrants, are identical or very similar, then the predator firm cannot sustain sufficiently lower prices for long enough to drive its competitors out of the market. Therefore, predatory pricing is more effective when the predator firm has a cost advantage over its competitors.

Predatory Pricing Will Be Most Effective When the Costs Structures