Question

There are generally four pricing practices that are unethical and even illegal in some countries. Describe two pricing practices that are related to anti-competition practices. How do they affect consumers in the long-run?

Answer 1

Price fixing pricing practice is an agreement or tie up between two players in the same market to continue assured fixed price levels for long period to avoid any competition in the market.

Predatory pricing, is one of the most popular anti competition pricing strategy , where price of product is keep at low price to capture new customers or to drive close competitors out of the target market. It may create entry barrier for new player in the same market.

In the general concept, competitors cannot bear lower prices due to high loss of money, some player may go out of business. These pricing is considered against illegal in many country under competition laws

Such pricing strategy may create benefit for the customer for short period of time in the market, but such pricing policy create a loss in long run. Some major losses for the customer may be.

• High cost for switching
• high trade-offs between price and required quality
• Difficulties in calculation of price
• Complex pricing strategy