What is predatory pricing?

PP is a post-entry strategy, which is used to squeeze competitors out of the market by setting its prices lower than average variable costs. With this method incumbent looses profits in the short-run  but long-run profits can be maximized, if incumbent subsequently increases its price. Short-run vs. long run. If strategy is not signaling a strong commitment in the short run  new attempts of marke penetration by new entrants.