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Supracompetitive pricing is pricing above what can be sustained in a competitive market. This may be indicative of a business that has a unique legal or competitive advantage or of anti-competitive behavior that has driven competition from the market.
An example of a unique legal advantage would be a drug company that is the first to discover and successfully manufacture a medication to treat a certain disease. Initially, as the only market player, the drug company may be able to charge supra competitive prices until other companies catch up. In this case, the regulatory hurdle for drug approval may prove a substantial barrier to new competition.
However, other companies may not be able to enter the market due to another barrier to entry, intellectual property rights. The drug company may have a patent on the new formulation, barring competitors until the patent expires unless they can license rights from the IP owner. An example of a competitive advantage may be a large company with a trusted brand name and a substantial marketing budget that simply overwhelms a local competitor by driving demand for its product over the competitor's product, at least in the short term. Supracompetitive pricing may also result following a period of predatory pricing, which has potential antitrust implications for the predator.
In marketing multiple competitive strategies, including price manipulation, can be used in order to gain competitive advantage. Successful marketing and business strategies are not only concentrated on creating the value for the customer, but also on the competition. Considering that, companies can decide between two main approaches, i.e. competitive strategies :•First approach is directed towards development and implementation of competition oriented strategies whose main goal is to create “better state of peace” between the market competitors.•Second approach is directed towards development of strategies whose main goal is to weaken, eliminate or destroy the competitor company. Those strategies are not focused on consumer welfare, but are oriented towards maximization of profits. This type of strategy is known as predatory strategy or predatory pricing.