How is price set in a perfectly competitive market?

The price in a perfectly competitive market is set at the intersection of the market demand and supply curves. Since firms cannot charge above the market price, they must focus on minimizing production costs to maximize profits. For each firm, the price remains constant for all units sold.

What is a competitive pricing strategy?

The competitive pricing strategy refers to a company setting prices based on the rates offered by competitors in the market for competing products. Competitive pricing—often used interchangeably with the term “competition-based pricing”—is a strategy in which a business sets its prices based on those of its competitors.

When is competitive pricing used?

Competitive pricing is used more by businesses selling similar products, since services can vary from business to business, while the attributes of a product remain similar. Competitive pricing is generally used once a price for a product or service has reached a level of equilibrium.