Under The Perspective Of Market Size, Business Cost Study

China's economic is capital-oriented to a considerable extent. The inherent character of capital to pursue profit makes enterprises to flow to the highest-income sectors or regions when they make their location decision. And business costs are decisive factors to the flow and location decision of enterprises.Adopting such methods of regression analysis, literature research and mathematical modeling, this paper studies the issues of the inverse relationship between market size and business costs, and then establishes a model of oligopoly comprising two interactive factors: business costs effect and consumer price effect. It studies, under policy incentives, enterprise location decision from two regions with different market sizes, and the decision's effects on benefits of both enterprise and the located region. A model of enterprise market access mode is established by this research to study the strategies adopted by enterprises that are influenced by business costs, the effect of business costs on enterprise location decision under the constraint from market size, and the competition between ecdemic and local enterprises under the effect of business costs. In the end, A self-enforcement mechanism of business costs is put forth by this dissertation.The main conclusions and innovation of this paper are as followed:Firstly, it is the inverse relationship between market size and business costs.Secondly, This paper finds that in symmetric Nash Equilibrium tax rate can be either positive or negative. With the development of economic integration, business costs continue to decrease, equilibrium tax rate drops to negative from positive first, and then increases again; when two regions only differ in market size, with the decrease of business costs their tax rates both show a tendency of decrease first and then an increase. And the region with larger market size, at each level of business costs, levies higher tax rates, and it witnesses an increase of aggregation level; within a certain range, business costs decrease with the increase of economic integration and decrease the benefit level of the region with larger market size but increase that with smaller market size.Thirdly, It is found that the mode is affected by both business costs and the cost difference. When business costs are low, ecdemic enterprises will adopt no strategies but export; and when they are high, the optimal access strategy will be decided by the cost difference; when the difference is large, ecdemic enterprises will choose the access strategy of direct investment; besides, through comparing the benefit levels of the located region by various access strategies, the research finds that when business costs are low, the located region inclines to the export from ecdemic enterprises; and it prefers direct investment from the latter when business costs are high.Lastly, A self-enforcement mechanism of business costs is put forth by this dissertation. Namely, policy incentives effectively change location of enterprises through decreasing the business costs of a specific region. The constitution and constitutive change of business costs further change the psychological expectation of enterprise location, and help form a hierarchy system of enterprise location; and the formation and development of aggregation are enhanced; while aggregation strengthens the enterprise location and itself, it availably reduces the business costs of the specific region through spillover effect, etc. Moreover, the decrease of business costs, that of trade cost, further attracts more enterprises to locate. Therefore, a self-enforcement mechanism of policy incentives, business costs decrease, location decision, aggregation formation and enforcement and business costs decrease is thus formed.The policy implication of this dissertation is rather obvious. Enterprises in West China, constrained by market size, are faced with such disadvantages as labor cost, transportation cost, public utility cost and business environment, etc. However, by means of policy incentives and economic integration with the East, namely, in the condition of non-cooperative game, the West can also promote its own benefits.