Two important factors in understanding price war distinctions are first, the state of each area’s market and second, the price sensitivity of consumers in each area.

“Chinese companies do have a lot more experience with price wars, which are widely reported business events,” says Zhang. “They are good at it. In the past 10 years, what triggered (the price wars) is the fact that the markets in China are growing. This business environment provides many profitable opportunities for [companies] to engage in price wars and to hone their skills. In a growing market, there are all different companies competing — some good, some bad — and the industry finds a way to consolidate. The only way to do that is a price war, where you bring down the prices and squeeze out the inefficient [companies].”

But the Western market is a more mature market, offering what Zhang calls “oligopolistic competition among mostly equals.” In lieu of price wars, this so-called mature market “encourages more finesse in devising marketing strategies” which may help explain why price wars are so frowned upon.

More at KnowledgeWharton

Bezos wants Amazon to run your business, at least the messy technical and logistical parts of it, using those same technologies and operations that power his $10 billion online store. In the process, Bezos aims to transform Amazon into a kind of 21st century digital utility. It’s as if Wal-Mart Stores Inc. (WMT ) had decided to turn itself inside out, offering its industry-leading supply chain and logistics systems to any and all outsiders, even rival retailers. Except Amazon is starting to rent out just about everything it uses to run its own business, from rack space in its 10 million square feet of warehouses worldwide to spare computing capacity on its thousands of servers, data storage on its disk drives, and even some of the millions of lines of software code it has written to coordinate all that.

More at Businessweek.com

Tata Steel’s acquisition of Corus shows how coordinated strategies can yield greater benefits even in a competitive marketplace. The strategic fit of Corus’s range of high-end products and know-how, and its access to developed markets, combined with Tata’s low-cost access to ore, efficient basic steel production, and its own market access certainly provide a solid starting point. What they have done is breaking out of the self-limiting constraints of non-cooperative reasoning that actually ends up being suboptimal. Instead, a coordinated solution through collaboration has led to the potential for greater gains for both.

Here is Shyam Ponappa’s detailed article in Business Standard

Related links
  Roger McCain on Game theory
  Wikipedia on Game theory
  On Hamada diagram (.pdf file)