Despite its potential benefits, price undercutting carries several risks:
1. Reduced Profit Margins: Lower prices mean reduced profit margins, which can be unsustainable in the long term. 2. Price Wars: Competitors may retaliate by lowering their prices, leading to a price war that can erode profits for all players in the market. 3. Brand Perception: Constant low pricing may affect the brand's perception, making it seem like a lower-quality option.