A price war occurs when competing sellers respond to each other's price reductions in an escalating cycle, driving prices downward until margins are severely compressed or eliminated. Price wars are particularly common on commoditized listings with multiple sellers using aggressive repricing rules.
The primary defense against being drawn into a price war is a clearly defined margin floor and velocity limits. When a competitor continues to undercut below your floor, the correct response is to hold position — not match — and compete on other factors such as fulfillment speed or seller rating.