First, we may need to define some terms:

Profit maximization is the name for the analysis that determines the price and output level that returns the greatest profit.

If profit maximization was the only consideration, firms would always operate where their marginal revenue was equal to their marginal cost - that is, when the cost of making one more unit was equal to the revenue earned from selling that same unit. That is the most common way for firms to operate.

Especially in the condition of Perfect Competition, cutting price to increase market share is a bad idea. Under conditions of Perfect Competition, there are many businesses with identical products, no barriers to entry (such as political barriers or large up-front investments), and good pricing information. This usually results in good prices for consumers. The large number of sellers of identical products means that consumers will come to you for a lower price but leave again when you raise prices. So you're likely to lose money and not gain share over the long term. In fact, 'market share' is not really meaningful to a firm in perfect competition because the firm can always sell all of its output as long as it is willing to accept the market price.

Likewise, in an Oligopoly market, this strategy is not likely to help you make more money in the long run. Oligopoly refers to a situation in which a particular market consists of only a small group of firms, such as the gasoline industry. As before, if you have a commodity-type product, consumers will come and go in search of the lowest price. Advertising may help build market share by increasing loyalty to a specific brand.

Monopoly is a market structure characterized by a single seller selling a unique product in the market. In a monopoly market, the seller faces no competition, as he is the sole seller of goods with no close substitute. An example of this may be a company in your area that provides electricity or water. By definition, you already have the entire market, so your market share cannot increase. Advertising may be useful to help consumers get information or feel better about buying your product,

It is only under the market structure that economists call Monopolistic Competition that the strategy of short-term price cuts might work for you. Monopolistic competition refers to many sellers of brand-name products that are slightly different from each other. There are many examples - beer, soft drinks, toothpaste, laundry detergent, and fast food, to name a few. If you cut your prices to below what the competitors are charging, you may be able to lure some customers away from another brand and make them loyal to your brand. Then, even when you increase your price back to your profit-maximizing level, they will stay with you and pay the higher price. Other kinds of promotions can be used to attract customers and build market share - coupons, giveaways, samples, etc.