👉 The price weapon refers to a strategy used by firms, particularly in oligopolistic markets, where they intentionally set prices at a level that makes it difficult for competitors to compete without incurring losses. By keeping prices artificially high, a firm can force rivals into a price war, as they struggle to match the higher prices without eroding their profit margins. This tactic can lead to reduced market share and profits for competitors, as they are unable to sustain their pricing without sacrificing their financial health. The price weapon is often employed in industries with limited competition, where a few dominant players can exert significant control over market prices.
