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CUT-THROAT COMPETITION

Statistics Directorate    
Definition:
Cut-throat competition, also known as destructive or ruinous competition, refers to situations when competition results in prices that do not chronically or for extended periods of time cover costs of production, particularly fixed costs.

This may arise in secularly declining or "sick" industries with high levels of excess capacity or where frequent cyclical or random demand downturns are experienced.

Context:
The destructive competition argument is often advanced to advocate government intervention in the form of price regulation or stabilization and structural rationalization.

Source Publication:
Glossary of Industrial Organisation Economics and Competition Law, compiled by R. S. Khemani and D. M. Shapiro, commissioned by the Directorate for Financial, Fiscal and Enterprise Affairs, OECD, 1993.

Hyperlink:
http://www.oecd.org/dataoecd/8/61/2376087.pdf

Statistical Theme: Financial statistics

Created on Thursday, January 03, 2002

Last updated on Monday, March 03, 2003