Predatory and Discriminatory Pricing

When managers have the task of set products and/or services, many factors atomic number 18 taken into account. One of these factors include legal requirements that companies have to victuals attach to nail down by the United States and world(prenominal) laws. These laws are set to protect consumers from vulturine determine and loaded determine (Horngren 2011). vulturine set is a situation where a company prices its products below its cost of production in drift to eliminate disputation to the point where the controversy has to go the market place due to major losses. Once the challenger has been eliminated then the company increases its prices and customers are frequently forced to buy products at such high prices because contestation has been knocked off the scene (Horngren 2011) (Garg, 2011). In this caseful companies may be challenged to prove their intent when this occurs. In the article, Is predatory pricing keen? in The Economic Times, the auth or explained that it may be uncontrollable to prove if a company is exploitation predatory pricing to get rid of competition. The author explained use three reasons. First, it must(prenominal) be determined if a company is pricing their products at below variable cost. Companies that do not appreciation their fair variable cost, they set about a decision to leave the market.

Secondly, if costs have been reduced, then companies can reduce their prices as well. Lastly, the rationale behind predatory pricing doesnt make such(prenominal) sense. When a company drives the prices so low and gets rid of competition and then raises prices, other companies will come along with cup board down prices to beat out the higher pri! ces (Garg, 2011). Discriminatory pricing is charging opposite prices for the same product to different customers (Horngren, 2011). One would enquire why companies would practice such an offense. If we think about our general lives in that respect are many instances where discriminatory pricing reigns, one deterrent example is buying a car. purchasing a car from a dealership is a game,...If you demand to get a honest essay, order it on our website: OrderEssay.net

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