What is the practice where large businesses set artificially low prices to eliminate competition from smaller businesses called?

The practice described—where large businesses set artificially low prices to eliminate competition from smaller businesses—is known as predatory pricing. This strategy involves temporarily reducing prices to a level that competitors, particularly smaller firms, cannot sustain. The intention is to drive these competitors out of the market, allowing the larger firm to subsequently raise prices once they have captured a larger market share and reduced competition.

This tactic can be damaging to the competitive landscape because it undermines fair competition, and it often relies on the larger firm’s ability to absorb short-term losses due to their significant financial resources. This practice is closely monitored and can lead to legal consequences if deemed anti-competitive under antitrust laws. Understanding predatory pricing is essential for analyzing market dynamics and the behavior of large corporations in relation to smaller competitors.