Cost Effective? Part 3 of 3

3. Pricing below market price can have some unintended consequences. For one, other competitors can match the lower prices. Now your margins have shrunk, and any incremental sales are likely split among all the vendors who’ve matched the new, lower market price.
Also, suppliers can react negatively to lower market prices. They can cut cooperative advertising funds, enforce minimum advertised price policies or cut the distributor’s margin to retaliate for price-cutting below the lowest market prices. Manufacturers typically don’t want price wars.