Hello there, need some help answering a follow up question from my instructor.

My original post was:

This week's forum discussion is about pricing and competition. The focus is on how low-cost price leaders enforce leadership through implied threats to a rival and how firms become "low-cost" price dealers.

There are different pricing strategies companies can utilize to maximize revenue, low-cost pricing is one of them. The way it works is by firms dropping their prices lower than their competitors, which will increase demand because consumers are happy with the low price and willing to consume more due to the affordability. Due to its simplicity, this strategy is often used by large retailers, for example, to compete against one another. These retailers "price guess" the price of competitors to determine theirs to have the upper hand on sales. Because of the influence these firms have on one another's prices an oligopoly exists.

Another strategic option is to have an advantage over a rival firm. For instance, find ways to reduce manufacturing costs, add new store locations, have special offers to constantly entice customers in addition to keeping the prices low. To become a low-cost price leader firms must ensure they can keep prices low while managing to stay profitable. By doing so it is forcing the competition to price match to remain relevant in the market. Furthermore, having a superior market share, a knowledge of market forces, or an agreement with competitors will assist firms in becoming low-cost price leaders.

An example is airline companies which always compete with each other. Some airlines offer low prices on certain destinations and to compete with this deal other airlines will then also lower their prices as much as possible and at times add free luggage and other perks to outdo competing airlines.

Thank you for your time.

Instructor's follow up question was:

Why would a firm want to discourage competitors from trying to compete on price? Why not just use their cost advantages to out-compete them?

Thank you in advance.