Taxi has become one of the most popular forms of transportation for many people since the twenty-first century. As taxi companies strive to keep their share of profits in the market, they develop strategies to provide customers with more pleasant and comprehensive services. As a result, the rivalries between these companies emerge inevitably. One of the most well-known battles in China is undoubtedly the one between Gaode taxi and Didi.
 
Case description and timeline
1.      On September 9, 2015, Didi rebranded from Didi Taxi. Over the next few years, this platform launched several service packages, including business purpose vehicle and free rides. As a result, Didi's network penetration rate reached an astounding 58.6% by the end of 2017, considerably above of other taxi platforms.
(data from qianzhan.com/analyst/detail/220/180628-b51ef43b.html)
2.      In 2017, Alibaba introduced Gaode taxi, a new taxi aggregation service.
3.      Gaode started a discounted taxi day on December 5, 2018, offering 10 taxi discounts to new and existing users every Wednesday. At the same time, Gaode taxi, in collaboration with different platforms, offers multiple discounts to new users.
4.      On October 1, 2018, Gaode's daily active users surpassed 115 million, making it the first app with more than 100 million daily active users in travel and tourism.
5.      Didi also began using the strategy of 10-yuan reduction on April 17, 2020.
6.      The daily order volume of Gaode taxi surpassed 4,000,000 in June 2019. Gaode was the second largest taxi platform in China at this time.
7.      On April 26, 2019, Didi travel officially launched the web car open platform, which opens itself to third-party platforms.
 
Analysis
The battle between Gaode taxi and Didi can be analyzed using the concept of Game Theory. Didi and Gaode have made some decisions in this game and those decisions both aim to improve their revenues and market shares. As a result, in this game, the two businesses have attained the Nash Equilibrium. However, attaining the Nash Equilibrium does not always indicate that the two sides of the game have reached an overall optimum state: like in the case with the online taxi-hailing battle.
 
When examining the decisions of the two firms, we should first make certain assumptions to better comprehend the situation from the standpoint of game theory. First, only two firms are competing in the market. Second, before the game, each online vehicle hailing platform's daily earning was 100,000 yuan. Third, an online car-hailing platform linked to other third-party platforms and the employment of the discount coupons demonstrates that it can provide consumers with more flexible pricing, therefore increasing the number of users as well as the revenues.
 
Basic Game Theory Model (assumed):

Please see in the image file

 
 
When Gaode taxi joined the online car hailing market, it opted to collaborate with a third-party online car hailing platform to build a more comprehensive service system and service plans to attract more consumers. Didi's daily revenues would be cut by 50,000 yuan if it did not cooperate with other platforms then. As a result, from Didi's viewpoint, collaboration with a third party is more preferable than to maintaining. Therefore, to retain their market shares, both Gaode taxi and Didi chose to partner with third-party platforms.  
 
It is clear from the timeline that the two online car-hailing firms are still competing on another level, which is, on discount coupons. During the growth of Gaode taxi, Alibaba employed discounts to entice users to use their platform's services, therefore increasing their market shares and revenues. Similar to working with third-party platforms, these two strategies may significantly boost their revenues and market shares, giving Alibaba the upper hand. To maintain its market shares, Didi can only reduce its revenues and passively participate in the discount coupons.
 
According to an aforementioned analysis, both firms have found their Nash equilibrium. They did not, however, achieve the optimum state as a whole. We can see from the above 2*2 matrix that the optimum state for the two firms is that they both do nothing, because each make $100,000. However, because each firm acted to preserve its own interests, each of them lost 20,000.
 
Summary
Because the two firms have been compressing their profit margins, the upshot of this pricing war is that no one earns money, which only makes customers happy because they can pay less money for better services. As a result, determining which firm benefits from the price war is tough. However, several conclusions and questions may be deduced from the above study:
1.     Following the “war,” the so-called low-cost approach became controversial. How can businesses succeed if their competitive strategy can be imitated?
2.     Which firm takes the action first, that company has the initiative, while the company that competes with it can only take passive actions.
3.     Customers are the winners in this fight, neither of the two businesses are.
 
In conclusion, if a company wants to grow and dominate the market, it must rely on unique and distinguishing features that competitors cannot replicate, such as NVIDIA's GPU technology, Apple's IOS system, and Nike's air cushion. As a result, if companies wish to promote long-term development, relying just on price competition is insufficient, and they must supply products that mirror the uniqueness of their brand.
 
 
 
 
 
 
 
 
 
 
 
 
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