Economics Consumer Surplus And Producer Surplus Questions
Price wars refer to intense competition between businesses in a particular industry, where companies continuously lower their prices in an attempt to gain a larger market share. This aggressive pricing strategy often leads to a downward spiral of prices, as each company tries to undercut its competitors. Price wars can occur due to various reasons, such as excess capacity in the market, a desire to drive out competitors, or to attract new customers. While price wars may benefit consumers in the short term by offering lower prices, they can have negative consequences for businesses involved, such as reduced profitability and potential long-term damage to the industry.