Price War Case Study

1. Introduction

Strategic interaction is a term that is broadly used to identify a process that seeks to involve several parties in achieving a common goal, relying heavily on effective communication to make progress in pursuing that goal. As strategic interaction is being related to the business world. This type of activity can prove to be very effective in a number of situations such as retail, business planning, managing and creating a marketing or effort in creating public relations, or even in general operation of a production facility. The examples of strategic interaction in business include price wars between companies, wage bargaining, bidding for UTMS or other licences and many more. Therefore, one of the key elements in strategic

2). This situation occurs when two or more firms of an industry tend to reduce or change their own prices so that they can stand out in the industry. In return this helps them to increase their market share and gain more profit, which is then followed by other competitive firms. Price fixing plays a major role in a price war. In some industry, state of oligopoly is quite apparent. Which results in forcing small business to walk out of the market. Bhattacharya, (1996) and Busse,(2000) have studied that companies suffer losses in terms of margins, consumer equity, and ability to innovate, fall victim to substitutes, and even face bankruptcy due to highly competitive market which ultimately results in price war. Initially consumers may be benefited from lower prices, may develop unrealistic reference prices and suffer from lower quality products in the long term. (Rao et al, 2000) have studied that the battleground for price wars extends far beyond a classic example involving the airline and energy businesses as price wars are seen to break out in all kinds of market and businesses.

A real world example of this is in the telecom industry of India, which has gone through various phases since its