Predatory pricing

Definition updated on November 2023

What does predatory pricing entail and how does it impact market competition?

Predatory pricing is a strategy where a seller deliberately sets prices at an extremely low level, often below cost, with the intention of driving competitors out of the market or preventing new competitors from entering. The idea is to "starve" competitors by depriving them of sales and revenues. Once these competitors are eliminated or sufficiently weakened, the seller can then raise prices to a higher, more profitable level. In the world of sneaker reselling, predatory pricing would involve a reseller or group of resellers undercutting competitors by listing sneakers at prices so low that others can't compete. The goal might be to establish dominance on a particular platform or to clear out smaller resellers from a specific niche. While it might seem advantageous in the short term, predatory pricing is risky. Prolonged periods of selling below cost can lead to significant financial losses. Moreover, this strategy can attract regulatory scrutiny as it's considered anti-competitive in many jurisdictions and can be illegal under competition or antitrust laws. For consumers, while they may benefit from lower prices initially, in the long run, reduced competition can lead to higher prices and fewer choices. For the sneaker resell market to remain vibrant, healthy competition is vital. Engaging in predatory pricing not only poses legal risks but can also damage a reseller's reputation and long-term sustainability.

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