From time to time there is a public outcry against predatory pricing

Question

From time to time there is a public outcry against predatory pricing- where a company deliberately sells its products at prices low enough to drive its competitors out of business. But this practice clearly should be acceptable, because even after its competitors go out of business, the mere threat of renewed competition will prevent the company from raising its prices to unreasonable levels.

Which one of the following is an assumption on which the argument depends?

(A) Any company that is successful will inevitably induce competitors to enter the market.
(B) It is unlikely that several competing companies will engage in predatory pricing simultaneously.
(C) Only the largest and wealthiest companies can engage in predatory pricing for a sustained period of time.
(D) It is only competition or the threat of competition that keeps companies from raising prices.
(E) Any pricing practice that does not result in unreasonable prices should be acceptable.

Source: LSAT

nishantd88 · Accepted Answer

From time to time there is a public outcry against predatory pricing- where a company deliberately sells its products at prices low enough to drive its competitors out of business. But this practice clearly should be acceptable, because even after its competitors go out of business, the mere threat of renewed competition will prevent the company from raising its prices to unreasonable levels.

Firstly, it is important to correctly identify the right conclusion.
It is NOT "Company will raise prices to unreasonable levels due to fear of competition"

The conclusion is "predatory pricing practice should be acceptable."
The argument to support the conclusion is that even if a company practices predatory pricing and drives out its competitors, it cannot increases prices to unreasonable levels due to the threat of new competition.

So in a nutshell "Predatory ricing should be acceptable because it will not lead to unreasonable prices."

Now lets analyze the options.

(A) Any company that is successful will inevitably induce competitors to enter the market.  Not linked to the conclusion or supporting argument. 
(B) It is unlikely that several competing companies will engage in predatory pricing simultaneously.  Not linked to the conclusion or supporting argument. 
(C) Only the largest and wealthiest companies can engage in predatory pricing for a sustained period of time.  Not linked to the conclusion or supporting argument. 
(D) It is only competition or the threat of competition that keeps companies from raising prices.  This questions the validity of the argument supporting the conclusion, but not the conclusion. Even if we assume there might be other factors too that keeps companies from raising prices, competition may still be an option and it may well the more dominant reason that overrides the other factors. So there is no assumption that competition is the only factor. The assumption is that it is the major or one of the major factors. 
(E) Any pricing practice that does not result in unreasonable prices should be acceptable.  This options directly talks about our conclusion. Predatory ricing should be acceptable because it will not lead to unreasonable prices. And this option states the inherent assumption in the argument's line of reasoning that we do not need to consider any factor other than unreasonable pricing while deciding what should be acceptable.

GMATNinja · Answer

The author concludes that  predatory pricing should be acceptable . The logic here is not too complicated, but it is subtle:

When company engages in predatory pricing, it lowers prices to drive competitors out of the market. 
  The public does not like this practice. 
  But after driving its competitors out, the company will still want to avoid competitors coming back into the market. 
  Consequently, the company won't raise its prices to unreasonable levels. 
  Therefore, predatory pricing should be acceptable.

The author concludes that we should be OK with predatory pricing. This conclusion assumes that our acceptance of this practice depends on  whether the prices of products rise to unreasonable levels . This is a very targeted conclusion with a very targeted assumption. It's tempting to focus on whether or not there are competitors around (as we're all trained to do in the business world), but the right answer choice will  identify the connection between reasonable price levels and acceptance of predatory pricing . So how do we fill that gap?

The conclusion we're evaluating is  whether predatory pricing is acceptable . Knowing that competition will enter the market when a company is "successful" doesn't identify the assumption about pricing that we're looking for. And we're definitely not evaluating the general success of companies. We are looking for a connection between seeing a reasonable price and accepting predatory pricing. (A) is too broad, and doesn't identify why we would accept or reject the use of predatory pricing, so let's eliminate it.

The conclusion doesn't depend on  how many companies  engage in predatory pricing. And if multiple companies did practice predatory pricing at the same time, according the information given, one of them would eventually drive the others out anyway. Choice (B) doesn't give us any new information and doesn't address the specific logical argument being made, so eliminate it.

The argument doesn't depend on how large or wealthy the predatory company is. Choice (C) doesn't connect in any way to the argument's conclusion about why we should accept or reject predatory pricing, so we'll eliminate it, too.

Hopefully you noticed the word "only" in choice (D). Does the author's logic require that competition or the threat of competition is the  only  thing that keeps companies from raising prices?

No... Maybe in the absence of competition, or even  in addition to competition , a company would avoid raising prices because doing so would hurt its reputation/image. Or maybe it sells luxury items and people simply aren't willing to pay above a certain amount for those items.

(D) does not  have  to be true for the argument to hold, so we can eliminate this one.

Yes! This is the only answer choice that specifically targets  why the public should accept  predatory pricing. It's also unambiguous in telling us that  ANY  pricing practice that does not result in  unreasonable prices  should be acceptable. This completes the logic of the argument by reinforcing the importance of reasonable prices. Since this is such a good fit for the argument, any doubts we have about choices (A) and (D) should be even easier to let go of. (E) is the best choice by far, and that's why it's the correct answer choice.

This is a tough one! I hope this helps.

Ritz1605 · Answer

I did not get how E is the OA. Experts please help.

Drb89 · Answer

Can anyone provide OE for this qn ? OA seems generic.

Premise : Predatory pricing practice is followed by a company to drive competition out of market
Conclusion : Company might continue practicing this pricing due to fear of new competition

Assumption : Even if a company gains monopoly, if there is a price increase, then there will definitely be competition. Hence companies will not raise prices.

A gets its right.

D is a perfect trap. What if the government puts an upper limit on price. So even if there are no competition, the company can't still increase price.

CJWORK · Answer

A - Being successful in implementing predatory pricing does not indicate that a company is successful generally.
B - Not relevant
C - Not relevant
D - I think this is wrong because the passage already states that predatory pricing causes lower price to force competitors out. 
E - Only one left

AkshdeepS · Answer

Though, I got it right, but it was difficult to cross out D. I only crossed out D for its extreme language.

I chose E because it connects conclusion and premise.

GMATNinja  ,  KarishmaB

Please help with POE.

Akash720 · Answer

A,B can be eliminated for various reasons.

C, D can be eliminated as they use the extreme word 'Only'

E - This is the best option left out and this needs to be true as it is stated in the argument "But this practice clearly should be acceptable"

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KarishmaB · Answer

Premises:
Public is against predatory pricing
But even after competitors go out of business, threat of renewed competition will prevent unreasonable prices.

Conclusion: So this practice should be acceptable

We need an assumption here. An assumption is a missing necessary premise. Let's look for the missing link. The premises talk about how the policy prevents unreasonable prices. The conclusion drawn is that the policy should be acceptable. We are not given the link between unreasonable prices and acceptability.

Option (E) gives us that link: If a practice does not result in unreasonable prices, it should be acceptable. 
So (E) is the answer.

(D) It is only competition or the threat of competition that keeps companies from raising prices.
The argument doesn't make this assumption. The argument tells us that threat of competition is sufficient to keep prices reasonable. Is it the only factor? May or may not be. It doesn't change anything in our argument. We are given that it is a factor that keeps prices reasonable. We are told to believe that hence this practice should be acceptable. We are assuming that reasonable prices should make the practice acceptable. What keeps prices reasonable is not the missing link.

nightblade354 · Answer

Bumping for discussion. Really good assumption LR question from the LSAT!

Kanika3agg · Answer

Conclusion - The practise should be acceptable.
Pre-thinking assumption that I took - The company will keep its prices low for the threat of renewed competition so this is the only way that company knows how to keep the competitors at bay.
I analysed the options and none of them matched but only D and E seems the contenders.
So, i re-analysed them.
D) We cant make this a necessary condition that this is the only thing that keeps the companies from raising prices but this can be one of the reason and a sufficient reason.
E) Any pricing practice that does not result in unreasonable prices should be acceptable. If I negate this then our conclusion will not hold true.

Rickooreo · Answer

The conclusion is: But this practice clearly should be acceptable,
Premise (Not sure if this can be considered as a premise or a part of the conclusion, request you to confirm): Because even after its competitors go out of business, the mere threat of renewed competition will prevent the company from raising its prices to unreasonable levels.

Option D, exactly says this, the author thinks renewed competition and that no other factors are involved. Think of this as modified version of A causes B, strengthen will be C does not cause B. 
Hence I marked D, can you please help me with my mistake

mysterymanrog · Answer

The author concludes that the practice should be acceptable, because it prevents companies from raising prices to unreasonable levels, because of the threat of competition, even after they have gone out of business as a result of this pricing practice.

D makes the claim that it is "only" the threat of competition that prevents companies from raising prices. If you negate this (its not only the threat of competition or competition that prevents companies from raising prices), the argument is still valid. Competition, or the threat of, could still play some role in preventing the companies from raising prices, so it is still acceptable.

If E is negated (Not all pricing practices that does not result in unreasonable prices should be acceptable) the argument falls apart. The author has stated, that because the practice prevents companies from raising prices to unreasonable levels, it is acceptable. Therefore, E is a required assumption, because if not all practices that does not result in unreasonable are acceptable, then the argument falls apart.

unraveled · Answer

From time to time there is a public outcry against  predatory pricing - where a company deliberately sells its products at prices low enough to drive its competitors out of business. But this  practice clearly should be acceptable ,  because  even after its competitors go out of business,  the mere threat of renewed competition will prevent the company from raising its prices to unreasonable levels.

Which one of the following is an assumption on which the argument depends?

(A) Any company that is  successful will inevitably induce  competitors to enter the market. - WRONG. Not necessarily. 
(B) It is unlikely that  several competing companies will engage  in predatory pricing simultaneously. - WRONG. Like A, this is also not necessary.
(C)  Only the largest and wealthiest companies can engage  in predatory pricing for a sustained period of time. - WRONG. Like A and B, this is also not true necessarily. All the three choices don't touch the reasoning aspect at all.
(D) It is  only competition or the threat of competition  that keeps companies from raising prices. - WRONG. A likely candidate and it makes fall for itself for simply the use of word 'mere' in passage that might parallel with 'only' used in this choice.
(E) Any pricing practice that does not result in unreasonable prices should be acceptable. - CORRECT. If it's not the case then we have trouble.

The highlighted text is reasoning used by author to conclude that predatory pricing practice should be acceptable.

Answer E.

VerbalBot · Answer

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From time to time there is a public outcry against predatory pricing

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