A race to the bottom refers to when competing companies, try to undercut the one another’s prices. This usually happen by sacrificing quality standards or worker safety, or even reducing labor costs by outsourcing.
Race to the bottom can be the result of adopting specific strategies like:
– Lowest price strategy: Offering a lower price than the competition, then the competition doing the same, till both are barely making any profit.
– Big discounts: Competing at offering huge discounts that put the profit at a very small margin.
To summarize, Race to the bottom is when competition over the price ruins quality and the profit margin.
