A price war is intense price competition between two or more competitors in a market. It is characterized by retaliatory price cuts that may escalate until prices fall below costs for some competitors. As such, it can result in competitors dropping from a market.
|Definition||A series of retaliatory price cuts by two or more competitors in a market.|
|Implications||A limited price war can be a sign of a highly functional market that is good for customers. An intense price war can end with large numbers of competitors dropping from a market. The result can be reduced quality and less selection. In some cases, a price war results in significantly reduced competition and higher prices in the long term. For example, a monopoly can emerge from a price war. |
|Related Concepts||Pricing Strategy|
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