A predatory pricing strategy will have the greatest chance of success when the predatory price is set below the cost of the firm's competitors,new rivals are unlikely to enter after the strategy ends,and profits can be recouped in a relatively short period of time.

Question

Quizplus · Accepted Answer

A predatory pricing strategy is designed to drive competitors out of the market by setting prices below their costs. For this strategy to be successful, the predatory price must be low enough to undercut competitors but high enough to be profitable in the long run. Additionally, new rivals must be discouraged from entering the market after the strategy ends, and the firm must be able to recoup its losses relatively quickly once competitors are eliminated. Therefore, the statement is true.

A Predatory Pricing Strategy Will Have the Greatest Chance of Success