Price competition, price war and industry performance: an empirical analysis on China color television manufacturing industry

Abstract

Large-scale price wars in many Chinese industry sectors have emerged, especially in consumer electronics, along with the declining profit margin in these sectors. Based on the empirical study on the Chinese color TV industry, this paper puts forward that the major reasons which intensify the price wars over a long period are, the insufficient differentials in the product and cost structure among competitors in the same industry, and the improper government intervention that mean that the production factors and capacities cannot be smoothly re-deployed according to the market signals, as well as the irrational competition logic formed in the process of successive price wars. Finally, this paper gives some discussions over the competition strategy issues for producers in the price war and policy implications for government and policy makers, with the aim to avoid no-winner price wars.