A policy an incumbent firm can use to discourage entry by a new firm into its market. Limit pricing involves charging a low enough price — the limit price — for entry to appear unprofitable to other firms. Limit pricing is not a credible threat: charging the limit price is not the optimal strategy after entry has occurred, and it is always best for the incumbent firm to accommodate the entrant.
Reference: Oxford Press Dictonary of Economics, 5th edt.
Invezz is a place where people can find reliable, unbiased information about finance, trading, and investing – but we do not offer financial advice and users should always carry out their own research. The assets covered on this website, including stocks, cryptocurrencies, and commodities can be highly volatile and new investors often lose money. Success in the financial markets is not guaranteed, and users should never invest more than they can afford to lose. You should consider your own personal circumstances and take the time to explore all your options before making any investment. Read our risk disclaimer >