The E-Commerce Price Wars (Oligopoly & Prisoner's Dilemma)

Abstract

Oligopoly stands as a major driver controlled by only a few large firms having a huge market share in an industry, adding significant impact on market dynamics. This study provides complete insights on oligopoly and prisoner’s dilemma in e-commerce price wars. It analyzes different features of oligopoly, strategic interactions, interdependence across firms, and entry barriers. This paper also examines several examples to explain Prisoner’s dilemma by comparing two firms and their decisions in an example. It elucidates oligopoly behavior of firms as part of game theory. There are different reasons behind price war in ecommerce industry. This study attempts to use behavioral analysis and game theory to explore various forms of competition and possibility of further study behind price coordination behavior. The study suggests the need to improve competition level in the industry for organizations to get rid of price war trap. Organizations should focus more on their product and technological innovation. Meanwhile, ecommerce enterprises should be rational to make strategies to avoid destruction from market competition and loss of confidence among consumers caused by excessive price war in extreme situations