Economics Game Theory In Behavioral Economics Questions
Predatory pricing refers to a strategy employed by a dominant firm in a market to drive out or deter potential competitors by temporarily setting prices below their cost of production. The goal is to eliminate competition and subsequently raise prices to monopolistic levels once the competitors are forced out of the market.
In the context of antitrust regulation, predatory pricing is considered an anti-competitive practice that harms consumer welfare and restricts market competition. Antitrust laws aim to prevent such behavior by prohibiting firms from engaging in predatory pricing strategies.
Antitrust regulation plays a crucial role in monitoring and preventing predatory pricing. It ensures that dominant firms do not abuse their market power to engage in predatory practices that harm competition and consumers. By enforcing antitrust laws, regulatory authorities can protect the competitive process, encourage innovation, and maintain fair market conditions.