It's a likely theory. But economics teaches us when a player overcharges, others will step in to undercut and take all the market share. So, we're at a point where we need to admit that mantra isn't true in the modern age, or admit that we've done a terrible job at preventing effective monopolies/duopolies from forming.
It's objectively obvious that the latter is true, but why?
One of the reasons is regulatory capture. But another is that people have stopped believing the former.
Suppose there is a market with an existing duopoly that charges high prices and you're a rich investor who likes to make money. Popular theory says that you shouldn't enter that market because they'll just undercut you until you go out of business and then go back to charging high prices.
But how does that work? Once you've invested the money to enter the market, you're committed. The incumbents have to deal with that. If you charge slightly less than they do, they have four options. One is to ignore you and keep doing what they were doing, which would allow you to take a disproportionate share of the market. Another is to match your price. But then you still get a third of the market where you previously had none and you now have goodwill with customers because you finally caused the market price to move in the direction they like, so that's quite profitable for you. The third is to buy you out, which is you turning a profit again.
The last is to undercut you and launch a price war. But by then you've already paid to build the infrastructure needed to compete with them. It exists. Even if you were to give up, you would still have that infrastructure to sell to anyone who wanted to give it a go. And if the expectation is that prices would return to profitable levels at any point in the foreseeable future, there would be returns in doing that for anyone with money to invest. Which mitigates your risk. And means the incumbents can't eliminate the competition by doing this. They can only torpedo their own profitability. Their real options are to lose some of their market share to you or buy you out, both of which are profitable to you.
So who taught investors that doing this is not profitable?