In this paper, the dynamics of hollow cathode discharge in argon is simulated by fluid model. In the numerical model considered are 31 reaction processes, including direct ground state ionization, ground state excitation, stepwise ionization, Penning ionization, de-excitation, two-body collision, three-body collision, radiation transition, elastic collision, and electron-ion recombination reaction. The electron density, Ar⁺ density, Ar^4s, Ar^4p, Ar^3d particle density, electric potential and electric field intensity are calculated. At the same time, the contributions of different reaction mechanisms for the generation and consumption of electron, Ar^4s and Ar^4p are simulated. The results indicate that hollow cathode effect exists in the discharge, and the Ar^4s density is much higher than electron density. The penning ionization 2Ar^4s → Ar⁺ + Ar⁺ + e and stepwise ionization involving Ar^4s make important contributions to the generation of new electrons and the balance of electron energy. In particular, the penning ionization reaction 2Ar^4s → Ar₂⁺ + e, which is generally ignored in previous simulation, also has an significant influence on electron generation. The spatial distribution of excited state argon atomic density is the result of the balance between the formation and consumption of various particles during discharge. Radiation reaction Ar^4p → Ar^4s + hν is the main source of Ar^4s generation and the main way to consume Ar^4p. Ar^4s + e →Ar^4p + e is the main way of Ar^4s consumption and Ar^4p production. The simulation results also show that the Ar^4p density distribution can better reflect the optical characteristics in the hollow cathode discharge.