Price Competition of Smartphones between Xiaomi and Huawei Based on Game Theory

Abstract

The Chinese smartphone market is intensively competitive. Huawei Honor copied the flash sales model of Xiaomi and sold products with E-Commerce. The analysis of Complete Information Static Games shows that the price competition between Xiaomi and Huawei has started. The main reason for the price war is that the products' horizontal differentiation is not significant. In addition, the price war has different impacts on producers, consumers and the middle-low end market. Xiaomi and Huawei Honor need to get a head start of 4G as soon as possible and constantly enhance product differentiation in order to achieve the final victory in Chinese smartphone market.