Study On The Influencing Factors Of Integration Between Coal Mine And Power Plant In China:Based On The Incomplete Contracting Theory

Since the Reform and Opening,China has gradually liberalized the government regulation of coal and electricity industries,and issued a series of policies to promote the integration between coal mine and power plant.However,except the mergers under the will of government,the market-driven ones are few,leads to a low level of integration of coal and electricity in China.Based on the theory of vertical integration of transaction cost economics,under the economic environment in China,high transaction costs and asset specificity lead to vertical integration,but this conclusion is not consistent with actual situation.Therefore,the influences and the adaptable policies of coal-electricity integration are one of the most urgent problems to be solved in the research of coal and electricity industries.The essence of decision of property right is the choice of enterprise boundary.Recently,the concept of incomplete contract theory and sequential production concept has been developed in the area of enterprise boundary decision obviously.Specifically,the sequential production causes that the different links of the value chain has different bargaining power,which could be reflected in the demand elasticity of the product.Thus,there is a logical relationship between product demand elasticity and enterprise boundary decision.The basic features of the thermal coal trade in China are highly consistent with the incomplete contract and the sequential production hypothesis.In recent years,as relaxation of regulations in China's power generation industry,the direct transactions between power plants and terminal power users are increasing gradually,products of electricity return to its commodity attributes.The long term contract of thermal coal is less and the cashing rate is not high,which reflects the incompleteness of thermal coal contract in our country.At the same time,intermediate products such as thermal coal are prioritized in the terminal products of coal-fired power generation,so the coal-electricity value chain has sequential production attributes.Therefore,the incomplete contract theory,which contains the concept of sequential production,is the main theory to study the influences of coal-electricity integration in China.The core of this paper is to analyze the inherent system of the coal-electricity integration,establish a model of influencing factors,and further study the impact of price elasticity of coal and electricity product demand on the coal-electricity integration.On this basis,this paper builds a measurement model covering the features of products,markets and assets,verify the influencing factors of the coal-electricity integration.Under the background above,in this paper,the new results of incomplete and sequential production assumptions and incomplete contract theory are introduced into the research field of coal-electricity integration in China.This reveals the relationship between demand elasticity of coal-electricity products and the coal-electricity integration.The main findings are as follows:a)Based on the incomplete contract theory,it reveals the inherent mechanism of coal-electricity integration.The study shows,information asymmetric of bargaining in the two transactions caused by sequential production has stimulated the terminal manufacturers' demand for the coal-electricity integration.It cannot completely eliminate opportunistic behavior in coal trading under incomplete contracts.The negative impact of the internalization of the intermediary transaction on the intermediate products and the end products restrains the terminal manufacturers'demand for the coal-electricity integration.The share of terminal manufacturers in obtaining intermediate rents from thermal coal is determined by the asymmetry in the degree of bargaining between the two transactions of the intermediate products and the end products and the share of property rights of intermediate suppliers held by the terminal manufacturers.As for terminal manufacturers,the decision of the coal-electricity integration is based on the trade-off between quasi-rent and discount of investment incentives after integration.b)The paper explains the influencing factors and the mechanism of integration of coal power property,and establish the frame of elasticity of product demand,market scope,degree of marketization,asset specificity,firm size and other vectors,from the product,market,assets and other dimensions.From the perspective of product,the elasticity of coal and electricity product demand is the negative factor of the coal-electricity integration.The main conclusions are as follows:the lower that demand elasticity of coal and electricity is,the higher that tendency of integration of the end product manufacturers and the coal intermediate goods suppliers.From the perspective of market,the extent of the market and the degree of marketization are negatively related to the degree of coal-electricity integration.From the perspective of asset,there is an incentive relationship between product demand elasticity and integration.The study shows that the demand elasticity in its upward channel for coal and electricity has a restrictive effect on coal-electricity integration in China.c)It reveals the influence from coal-electricity integration to market competition and business performance.The study shows that the coal-electricity integration not only has no significant negative impact on market competition but also can improve production efficiency and enterprise performance.The main innovations of the paper include:(i)By introducing the sequential production attributes of coal-electricity value chain into the research,the framework of coal-electricity integration is expanded from asset and transaction to product based on incomplete contract theory.Specifically,the paper reveals the incentive relationship between demand elasticity of coal-electricity and coal-electricity integration.(ii)The paper proposed and confirmed that the demand elasticity in its upstream for coal and electricity has a restrictive effect on coal-electricity integration.It clarified the reason why coal-electricity integration is less in China.(iii)The paper improves the traditional analysis mode composed of fully competitive market and fully integrated market.By identifying the degree of vertical integration of coal-electricity with continuous real range,the paper reduces the deviation between theoretical forecast and business practice.The paper studies the vertical transactions in the non-Coase world and adapts to the development stage of coal and electricity industry in China.This study has important practical value.In theory,combining the theory of incomplete contract and the concept of sequential production,this paper expounds the influencing factors of coal-electricity integration from the theoretical level,and provides the direction for the vertical integration of other fields.In practice,in accordance with specific circumstances in China,this paper reveals the coal power industry integration factors and the mechanism of action,and provides a reference for the enterprise decision-making and policy formulation.