What is supra competitive pricing?

Supra competitive pricing, also known as predatory pricing, is a pricing strategy used by a company to undermine competitors by intentionally setting prices lower than their costs of production in order to drive competitors out of business.

This strategy is illegal in many countries, including the United States and the European Union, because it is considered anti-competitive behavior that harms competition and consumers.

Supra competitive pricing is often employed by dominant firms with substantial market power because they can afford to sustain losses in the short run to drive out competition with the expectation of recouping losses in the long run by establishing a monopoly position.

However, this strategy is risky because if the firm fails to drive out the competition, it can result in significant losses and damage to their reputation. Furthermore, if they are caught engaging in this practice, they can face substantial fines and legal penalties.

Overall, supra competitive pricing is a controversial and risky strategy that must be used with caution, and companies should consider the potential long-term consequences of this practice.