Research On The Prive Competition Behavior Of China's Mobile Communication Industry

Economic principle tells us if some common and long-term economic features appear and exist in the whole market, it does not happen occasionally. Market, as a process, is an error-correcting process of the price from a set of wrong prices to a set of mutual adjusting prices. But the development of anything has its own reasonable limitation of quantity, the price competition will evolve into the over-price competition and even the price dumping if it transcends the reasonable limit. For those industries which have experienced the price competition, the most firms in these industries are at a loss or on the edge of loss and their products are often in the imbalance situation of supply and demand, especially, for some kind of industry, which even the whole industry appears to be in the condition of non-profit. However, although the price competition behavior of China's mobile communication industry is extremely fierce, the industry presents the complete different features characterized by the high demand and the great profit margin compared with those ones. So, the price competition behavior of China's mobile communication industry has always been the research project by most experts and scholars, for it cannot be simply explained by the theory of demand and supply. And the dissertation holds that it is the comprehensive result of many different factors, and it also embodies the inherent principle of both institutional adjustment and market selection which furthurly facilitates the effective market order.According to the Hayek's theory that the price competition is a kind of seeking procedure and some sort of adjustment process where competitors will adjust their action plans continually by their own objectives and relevant environment in which the mutual adjustment process carries out the coordination among the competitors and between competitors and their outside natural environment. The price competition behavior of China's mobile communication industry which is the game evolutive outcome between the governmental regulation force and the different firms under the condition of market economy, shows not only the practical path of de-monopolization but presents its endogenous changing process resulting from the domination of the selection process. During the whole process, all types of different factors function together to propel the stage evolution of the price competition behavior of China's mobile communication and finally to facilitate the industrial development and effective competition. Based on the relative literatures review, the dissertation considers the China's mobile communication industry as the main research objective and points out its characteristics of stage evolution and non-cooperative game, and then proposes the analytical framework of A (asymmetrical regulation)-R(rent)-T(transferable or switching costs)-D(product differentiation), which thereafter enriches and supplements the theoretical and practical study of the price competition behavior of China's mobile communication industry. Based on the analytical framework, then the dissertation delves into the influential mechanism of these fou rmain factors to the industrial price competition behavior respectively.Firstly, by adopting the empirical method and canonical parse, the dissertation proves that the governmental policy of asymmetrical regulation has the promotion effect to the price competition behavior of China's mobile communication industry while this promotion mechanism lies in the effect of market share shifting and efficiency enhancement. Meanwhile, the policy of asymmetrical regulation also encourages the adoption of product differentiation strategy for the firmss in this industry. Therefore, the asymmetrical regulation adopted by our government has reached the expected aim to some degree, namely it promotes the optimization of the market structure of China's mobile communication industry. Owing to the unfair feature of the asymmetrical regulation, China Mobile begins to steer clear of this policy influence which leads to the weakness of the policy during the deepen competition of the price between China Mobile and China Unicom. It also shows that the asymmetrical regulation, as a sort of non-price competition mechanism, has the dynamic and short-term features and should be relatively adjusted with the changing of environment. Also included in this dissertation is the analysis of the fringe entry of "little smart" which scrubs round the face-to-face conflict with the policy of asymmetrical regulation and finally also promote the price competition behavior of this industry. The entry of "little smart" functions as the correction of over-profit and the higher price during the demand-enlarging in the industry which has resulted into the return of reasonable price. Therefore, the promotion mechanism of price competition behavior has carried out by the function of entry correction of the "little smart". Next, the dissertation builds a conceptual modal about the influence of economic rent on the price competition behavior of China's mobile communication industry by adopting the method of canonical parse and experiential analysis. The research shows that the initial accumulated higher monopoly rent has enhanced the formation of price game in the industry under the function of the touching mechanism of asymmetrical regulation on the pricie competition behavior. Moreover, once this sort of price-lowering game has happened, its price-reducing orientation has self-enhanced in the later price competition. But, with the degree of effective competition improving and the dissipation of the initial accumulated higher monopoly rent, the firms'newly-generated monopoly rent has the positive adjustment function during the implicit and post-price competition stage which has transformed from the seeking of Schumpeter's and Richard's rent. And with the competition degree improving, this kind of positive function also continually weakens. In the implicit stage of price competition, the Schumpeter's rent generated by the technology innovation promotes the price competition, too. While in the stage of post-price competition, because the price competition has not become the main competitive means among firms, the promotion function of Schumpeter's and Richard's rent starts to be weaken, although it still brings the balance price going down in the industry.Then, the dissertation expounds that the transferable or swiching costs in the industry have different functions in the different developmental stage of price competition based on the game method:transferable costs have enhanced the degree of price competition behavior in the explicit stage of price competition; while it holds down the degree of price competition in the stage of implicit and post-price competition. The behavior of product differentiation adopted by these two firms also has promoted the price competition of China's mobile communication industry. Moreover, the transferable costs and the product differentiation have combined to hold down the fierce degree of price competition of China's mobile communication industry.Finally, the dissertation holds that the price competition behavior of China's mobile communication industry has not only promoted the optimization of market structure, but also has improved the market performance. Based on the empirical method, the dissertation proves that the promotion function of the market structure optimization to the price competition of the mobile communication industry is more than the one of the price competition to the market structure optimization of the mobile communication industry. It also proves that the policy of our governmental de-consolidation and re-organization has the positive function to build the effective competitive market structure of China's mobile communication industry because this kind of result has not come true by the simple market operational mechanism. Therefore, with the continual maturation of the telecommunication market, this dissertation discusses that the price level of telecommunication service will approach to the average balance and the price competition is not the main competitive way, but the price competition will not disappear and has become the contingent selection under the condition of the whole service operation. The competition of the mobile communication firms will mainly take the form of non-price competition behavior and differentiation competition will become the long-term competitive behavior among the China's mobile communication firms. Then the general conclusions are pointed out based on the above analysis and also some countermeasures or suggestions are made.