price war

noun
Updated on: 26 Jul 2017

Definition of price war

  1. :  commercial competition characterized by the repeated cutting of prices below those of competitors

Examples of price war in a Sentence

  1. The airlines are engaged in another price war.

First Known Use of price war

1895


Financial Definition of PRICE WAR

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

price war

noun

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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