The Pricing Mechanism and Decision-making of Core Components Based on the Game Model under the Implicit Condition of Localization Substitution

Pricing is important when considering the difficulty of localizing core components. Localization encompasses three essential implicit conditions, under which a two-stage alternative game model reveals the formation of prices of domestic core components: the contraction in price at the beginning of localization is negatively correlated to the cost of domestic core components. Further analysis shows that sellers of domestic core components may use the strategy of second-degree price discrimination to alleviate the contradiction between cost and price reduction. It is also possible to adopt the price skimming method or the experience pricing method based on the order of entering the market.