Definition of price war
: commercial competition characterized by the repeated cutting of prices below those of competitors
Examples of price war in a Sentence
The airlines are engaged in another price war.
First Known Use of price war
Financial Definition of PRICE WAR
What It Is
A price war is an event whereby two or more companies continually lower prices to undercut each other.
How It Works
Airline companies are famous for their price wars. If Airline XYZ cuts the price of a flight from Los Angeles to New York from $800 to $700, Airline ABC, which is competing for business on that route, might cut its fare to $650. Airline XYZ might respond by lowering its fair to $625, and so on.
Why It Matters
Engaging in a price war is a competitive strategy, usually to capture market share. Falling prices tend to attract more customers. Some companies may choose to sell a product or service at a loss, however, in order to capture market share and outwin competitors. In some cases, this might lead to antitrust violations.
PRICE WAR Defined for English Language Learners
Definition of price war for English Language Learners
: a situation in which companies or stores compete with each other by lowering their prices on goods or services in order to attract more customers
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