If a business attempts to “corner the market” by charging prices that are too low (i.e., below its’ variable costs of production), the business may drive competitors out of the market temporarily (at the price of eating up its financial capital and eroding its profits); but, as soon as the business raises its’ prices (in order to reap profits in order to build back the capital it has given away by selling products below their variable cost), new competitors will enter the market.

The only way a company can gain profitably gain market share by lowering its’ prices, is if it can lower its costs of production. If a business can charge the lowest price because it has figured out how to build a better mousetrap (i.e., produce more for less), then it deserves whatever market share it can obtain.

Share This

Share this post with your friends!