| Coal industry and Electricity industry are energy support for economic development in China. Coal energy occupies 60% or more in the production and consumption of Primary energy in china. Thermal electric generation dominated in china's electric power industry, and 70% of coal is used for electricity generation. Coal industry and Electric power industry thus have a close relationship, located at the upstream and downstream of this industrial chain. Since 2002, with the marketization of coal price, the binary price mechanism of'the market price of coal'and'plan price of electricity'caused the coal and electricity industry hard to coordinate and separate the interests. The result of game between the coal enterprises and electricity enterprises is the shortage of electricity and coal, bringing about instability to economic production and decrease in industry chain efficiency.The study on coal and electricity industry chain contributes to understanding the current situation of coal and electricity industry, revealing the causes of conflict. It also plays an essential role in formulating industrial policy. The aim of this study is to analyze current vertical structure of coal and electricity chain as well as the behavior and performance of coal enterprises and electricity enterprises based on the Industrial Chain Theory and the Industrial Organization Theory. The paper also analyzes the current characteristics of coal industry chain and finds out the main contradiction of coal and electricity chain and the core factors that influence the longitudinal relations arrangement of this industry chain. Through the model and factor analysis, the thesis proves the optimal choice of the longitudinal relations arrangement of coal and electricity chain and gives some suggestions in this regard. Through empirical research, the thesis gets the following conclusions: firstly, the longitudinal market structure of coal and electricity industry chain is that ---upstream coal market is monopolistic competition and downstream electricity industry belongs to oligarchy monopoly type. The coal enterprise sellers market force is relatively weak while electricity enterprise has strong monopoly buyer power. In reality, the coal industrial concentration tends to focus, while concentration of electric power generation tends to disperse; some large coal enterprise group has certain oligarchic properties with strong market forces and bargaining skills in regional area; Secondly, the main contradiction is different levels of marketization of upstream and downstream industry of this chain. Electricity enterprises cannot transfer the upper marketized coal prices pressure to downstream link because of the regulated on-grid price, resulting in losses of the electric enterprise and the interest distribution problems of whole industry chain. Thirdly, the current longitudinal relations arrangements like short-term contract cannot solve the contradiction due to large opportunism motivation; linking price mechanism cannot be implemented when domestic inflation exists; profit segmentation of the industrial chain cannot simultaneously satisfy coal and electricity industries. Fourthly, from the perspective of long-term cost savings and transaction cost saving, the final two factors in determining the longitudinal relations choice arrangement are variables ---'degree of marketization of trading system'and'longitudinal negotiation ability between coal enterprise and electricity enterprise'. Under the current situation with low degree of marketization of trading system and high longitudinal negotiation ability between coal enterprise and electricity enterprise, the optimal choice for China's longitudinal relations of coal and electricity industry chain is vertical integration. Fifthly, a higher level of vertical integration will result in a higher ROA, which prove the type of the associates between coal and electricity is practicable competitive advantage. |
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