Which of the following best describes predatory pricing?

Predatory pricing is best described as a strategy where a company temporarily sells its products or services at prices that are lower than its costs in order to eliminate competition and gain market share. This approach is often used with the intent of driving competitors out of the market. Once the competition is significantly weakened or eliminated, the company can then raise its prices to recoup its losses and potentially establish control over the market.

This strategy is considered detrimental to competition and is often subject to regulatory scrutiny because it can be harmful to consumers in the long run by reducing competition and leading to higher prices once competitors have been forced out of the market. It is not a sustainable long-term pricing strategy, as it relies on financial strength to sustain losses while driving out competitors.

In contrast, selling at prices higher than competitors is a standard competitive pricing strategy that focuses on providing added value or premium offerings. A sustainable long-term pricing strategy usually involves pricing that considers costs, competition, and customer value. Enhancing customer loyalty typically involves practices such as loyalty programs or offering superior customer service, rather than predatory pricing tactics.