Abstract: We develop a general-equilibrium asset-pricing model with dynamic games of price competition. Price war risks arise endogenously from declines in long-run growth as firms’ incentive to undercut prices grows stronger with a worse growth outlook. The triggered price wars have amplification effects by narrowing profit margins. In industries with higher capacity for radical innovation, firms compete more fiercely for future market dominance. Their incentive for price undercutting is less responsive to long-run growth shocks, and they are more immune to price war risks and long-run growth shocks. Our results shed new light on the relationship between competition and equity returns.