Strategies to Mitigate Cutthroat Competition in E-Commerce: Insights from Game Theory

Abstract

As e-commerce industries advanced irresistibly in recent years, some platforms chose to reduce prices again and again to seize the market, which lead to vicious competition and price war. So, this article tried to find out the best method for different companies to deal with price war. Based on several articles about how to avoid price war for enterprises, this article analyzes price war from the game theory perspective by establishing static game models to analyze the feasibility of each method. The result show that the main reason of this phenomenon is people are trapped in a prisoner's dilemma, and price war is an economic necessity behavior. As a result, government is suggested to establish market superior department and companies are suggested to produce differential products and cooperate with each other to deal with price war. For different kind of enterprises, oligopolies can produce products suit for different people and collaborate with influential companies in different areas while supply chain companies should reach a cooperation treaty with upstream and downstream enterprises achieve win-win cooperation.