Basic Aspects of Price Wars

Abstract

Albeit many pieces of research deal with price wars or certain aspects of price wars, a conceptualization of the term price war is typically done briefly — particularly in the economics literature. It often appears that, although obvious war-type price interactions are analyzed, the term ‘price war’ is not explicitly used or, presumably intentionally, avoided (e.g. Brühlwiler 1989). Looking at research on the topic, it becomes obvious that price wars are a rather complex phenomenon. Yet even their existence is denied by many scholars. To shed light on the nature and structure of price wars, this chapter aims to give an overview on approaches towards the definition of price wars. Other important basic aspects of price wars are the market structures and firm strategies leading to price wars, the negative consequences of price wars, and typical war dynamics. The chapter closes with a distinction of the term price war to other forms of competitor-oriented pricing like limit pricing, predatory pricing and price dumping.