Explain the value of extinction as a pricing/marketing strategy.

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vixen999 | High School Teacher | (Level 2) Adjunct Educator

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If so, this is a strategy where a company undercuts its competitors pricing--usually severly.  The unstated goal is to get the other player(s) out of the particular market or product.  The company that uses this strategy may even make the price to buyers less than the cost to create the item.  This strategy is usually employed by a strong company that is threatened in a market or in a product segment by small, nimble companies that may not have significant funding.  In other words, the company employing the elimination pricing is probably the large incumbant who has plenty of money to subsist at this state until the other player gives up.  

From a legal standpoint, a company may have to be careful of using this strategy--especially if they are the largest company in the market as it could be considered predatory.

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