By using game theory and information economics. According to the present state of China's EC (Electronic Commerce) market, game theory model of price competition between EB (Electronic Business) retailer and traditional retailer is set up to find Nash equilibrium of price competition. It comes out following conclusions: First, the cost of commodity is crucial to EB retailer, who should exert himself to get the cost down to win the competition. Second, it will help EB retailer to increase market demand and make more profit through the sale, if he can keep the delivery cost down to the best of his ability. Third, as the Internet population increases, EB retailer will aggrandize his profit and market share.