Question

1. What do you think about practicing a predatory pricing strategy and its impact?
2. Should predatory pricing be an illegal strategy? Why?
3. As a policy maker, what do you suggest to protect consumer rights?

Answer 1

Predatory pricing marketing strategy is when a manufacturer sells its product at a very low price which forces out other competitors from the market.

a. This kind of pricing strategy has a great impact on the market. While the company sells its products at a low price initially which helps the consumers in buying products at a lower than the fair cost, but it forces out other competitors who cannot compete with such a low price and sustain in the market. This helps the manufacture in establishing a near-monopoly over the market. This can lead to the manufacturer selling the products at a very high price due to the lack of substitutes in the market later on.

Therefore, a predatory pricing strategy might seem, beneficial to the consumer but in the longer run, the impact is harmful and far-reaching.

b. Yes, predatory pricing should be illegal. Through this strategy, big and established companies can use their economies of scale to sell their products at a very low price to force out the competition. This is not beneficial for the industry in the long run as it establishes a monopoly that may hamper innovation, and product development in the future. Also, as stated above, the end-user has to pay a higher price for the same products after the monopoly is established. This is not a good strategy for the economic growth of the country.

Therefore, such a pricing target should be made illegal.

c. A consumer forum must be established which addresses the grievances of the consumers. It should be given rights to serve notices to business companies indulging in unlawful, and unethical business practices and must be given authority to conduct investigations of their own pertaining to the business operations of the business organizations.

This will help in establishing a system where the business organizations operating in the country can be held accountable for their actions.