In Western management theory, there is almost unanimous consensus that price wars are best avoided because they can have devastating (often unintended) consequences for participants. In China, of course, price wars are an accepted part of business life. In fact, this year has seen Chinese price wars in various sectors, from e-commerce, to financial services, to automotive, to commodities. Vanguard's case is especially ironic: a pioneer in low-cost investing in the U.S., it had to pull out of China earlier this year, and its remaining robo-consulting joint venture with Ant Group finds itself under extreme price pressure from local rivals such as Huatai Securities.

Reading the recent price war headlines brought to mind a paper from Z. John Zhang (Wharton) and Dongsheng Zhou (CEIBS). Though the paper is over a decade old, its analysis of price wars is still worth reading to understand how they work and why they persist.