The Pricing Game Analysis On Domestic Advanced Automobile Industry

Automobile industry is essential to the Chinese development, which speed can decide the move of a national economics. The Chinese automobile industry is still at the initial stage and each enterprise's total output is much less than the advanced enterprise of other countries. What is more, the size effect of Chinese automobile industry, which is essential to the development of automobile industry, does not show because of the restriction of the output.Since government allowed private to buy cars 2000, the demand on cars has surged and the price of car has decreased greatly. The decline of car's price has become a key issue of the nation.In the first part of the paper, the industrial organization of domestic advanced Sedan car industry market is analyzed, by means of the SCP model (Structure- Conduct-Performance). On the basis of the analysis, a conclusion is made that the structure of the industry is an oligopoly one. The popular short-term strategies to gain the market power are cutting down price and supplying varied types of cars, which result in the decrease of profit margin and the progress of technology.In the following charts, the paper tries to illustrate the price war that breaks out at present by means of industrial economics pricing game theory. It discusses the traditional Bertrand model and then introduces the supergame model that can be applied under the condition of boom. It is contended on theoretical grounds that implicitly oligopolies are likely to behave more competitively in periods of high demand and they will take actions to break up the unite among them. The possibility of price war in boom among them is more than that in regress.In the third part, the paper analyses the reasons and effective of price war that broke out among the automobile industry at present, which proves the correction of the theory further.In the finial part, the paper analyses the further reasons behind the price war. The pricing strategy is an effective method in the short term but if enterprise wants to make a long-run progress, it should focus on the improvement of core competences.