Final answer:
Low-cost providers use strategies such as predatory pricing which ensures low cost production but can lead to unfair competition and uneven development in the market. This practice distorts competition, may abuse power, and interfere with the economy on various scales.
Step-by-step explanation:
While low-cost providers are champions of frugality, they employ strategies that go beyond simple cost-saving measures. These providers participate in actions that can distort the competition and have significant impacts on industry and economy. For example, consider a large airline with a dominant presence between two cities. When a small startup airline tries to enter the market, the larger airline may engage in predatory pricing, slashing prices to unsustainable levels for the new entrant. After the competitor has been driven out of the market, the incumbent can then raise prices again.
This practice ensures low cost production and may appear beneficial to consumers in the short term, but it contributes to uneven development and can enforce unfair competition. It also raises concerns about abuse of power and the potential for larger entities to interfere in the local economy, demanding concessions that may not be in the best interest of the local community or market dynamics. Additionally, accusations of predatory pricing have been made in various industries, ranging from airlines to retailers, as with the cases involving American Express, Mastercard, and Amazon.
In summary, while low-cost production may offer consumers savings initially, it can ultimately foster unfair competition and an unequal business landscape that deters new players and concentrates power among a few established firms.