Research on Enterprise Price Competition from the Perspective of Game Theory—Taking Luckin Coffee and Cotti Coffee as Examples

Bachelor of Business (Applied Fiance), Western Sydney University, Parramatta City, New South Wales, 2116, Australia

^* Corresponding author: aacok@ldy.edu.rs

Abstract

In recent years, the competition between Luckin Coffee and Cotti Coffee has intensified, leading to an increasingly aggressive price war in the Chinese market. This research utilizes game theory to analyze the price competition between these two companies, offering a clearer understanding of the interdependent and dynamic nature of their pricing decisions. By constructing a price game model, the study delves into the essence and internal logic of their competition, comparing the pricing strategies, market responses, and overall impact of these price wars on both companies. In 2023, both Luckin Coffee and Cotti Coffee aggressively pursued market share through extreme pricing tactics, triggering a prolonged and fierce price war. The analysis reveals that while these tactics temporarily bolstered their market positions, they also exposed both companies to significant margin pressure and increased business risks. The research underscores the unsustainable nature of such competition and the potential long-term harm to both companies’ profitability and market stability. Based on these findings, the paper offers several recommendations aimed at fostering a more fair, orderly, and sustainable competitive environment within the industry. By moving beyond aggressive price wars, Luckin Coffee and Cotti Coffee could focus on building brand loyalty, improving product quality, and innovating in service delivery, ultimately creating a healthier and more balanced market landscape.