Price competition financial definition of price competition
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price competition a form of rivalry between suppliers that involves an attempt to win customers by offering a product at a lower PRICE than competitors. Price competition is especially beneficial to consumers insofar as it results in the establishment of prices that are consistent with the real costs of supplying the product and serves to improve the RESOURCE ALLOCATION efficiency of the market by eliminating inefficient, high-cost suppliers (see PERFECT COMPETITION). From the suppliers’ point of view, price competition is often something to be resisted because it reduces the profitability of the market, and, where conditions permit (for example, OLIGOPOLY), suppliers may attempt to avoid price competition. See PRICE LEADERSHIP, PRICE PARALLELISM, COLLUSION, COMPETITION METHODS.