A winery that makes a huge profit on merlot wines may lower its price on pinot noir wines to cause damage to wineries that produce only pinot noir. This is an example of predatory pricing.

Question

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Predatory pricing occurs when a company sets prices below cost with the intent to eliminate competition or discourage new entrants into the market, which is what the winery is doing by lowering its pinot noir prices to potentially harm competitors specializing in that variety.

A Winery That Makes a Huge Profit on Merlot Wines