Compare the practices of price fixing and predatory pricing. Explain why each is prohibited by law
What will be an ideal response?
Many federal, state, and local laws govern the rules of fair play in pricing. Two major areas of concern are price fixing and predatory pricing. Companies that engage in price fixing collude to set a common price for their comparable products; price fixing undermines the core element of price competition in our free-market economy. On the other hand, predatory pricing takes price competition too far. Predatory pricing occurs when a company sells a product below cost with the intention of punishing a competitor or by putting a competitor out of business.
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