Editing Predatory pricing (section)

==Implementation conditions==
1. Sacrificing short-term profits

The economic theory of predatory pricing involves a company pricing its goods and services to generate less revenue in the short term, thus, eliminating competitors and increasing market power. The theory does not explicitly state that profits must be negative in order for this to be achieved. In anti-monopoly law enforcement, determining the level of pricing that constitutes predatory pricing can be difficult in operation. The generally acceptable standard is that during a period of predatory prices, the predator's profit will be negative where the price is lower than the initial cost. However, with this the question arises as to what kind of cost should be used as a reference. The use of a price that is lower than the cost may make certain predatory pricing practices not legally binding.

According to the theory of industrial organization, some predatory pricing practices may not necessarily lead to negative short-term profits. However, in this particular case, the company's ability to make low-cost profits can indicate that the company is a highly efficient company compared to its competitors. This does not necessarily indicate that such instances will lead to reduced benefits in the long-term as non-entry of entrants does not necessarily reduce welfare, and entry of entrants does not necessarily improve it. Consequently, anti-monopoly law ignores this and does not result in major welfare losses.<ref>{{Cite journal |last=Salop |first=S.C |date=1986 |title=Predatory pricing: Strategic Theory and Legal Policy |journal=Antitrust Law Journal |volume=56 |issue=2 |pages=253–293}}</ref>

2. The ability of incumbent company to raise prices

An important condition for predatory pricing is that, after excluding competitors, a dominant firm can raise prices to compensate for their short-term losses. To achieve this, market power can be an important factor. However, under EU law, market power is not necessary to establish predatory pricing,<ref>{{Cite book|last=Ekaterina|first=Rousseva|title=Rethinking Exclusionary Abuses in EU Competition Law|publisher=Hart Publishing|year=2010|isbn=9781841139265|pages=408}}</ref> since other factors such as barriers to entry can indicate an abuse of a dominant position.<ref name="European Commission"/>

It is also important to note the barriers to entry impact on a dominant firm's ability to raise the price of their goods and services. On the exclusion of these barriers, other firms could theoretically enter any market where an incumbent firm is enjoying [[Profit (economics)|economic profits]], thereby preventing the dominant firm from sufficiently raising prices high enough to recoup the costs of lowering price.