| Since 2005, with the rapid growth of economy, excess capacity also appears in some industries one after another and the question has become the key regulation objection of national macroscopic economy control section. Many scholars elaborated the origin of excess capacity from the excessive investment and region economic competition and so on. In fact, enterprise competitive strategies also played the important role in the forming of excess capacity. Generally speaking, the excess capacity strategy causes two effects to an industry when the established firm uses it to deter the prospective entrant. One kind of situation is forming the industry's excess capacity, and the other kind of situation is certainly not causing excess capacity. This article emphasizes on the market and technological conditions that can cause excess capacity when the established firm uses the excess capacity strategy to deter the prospective entrant.When domestic and foreign scholars study the excess capacity strategy, their papers usually limit to the relations of the strategy and the entry of prospective firms. This article performs to extend it regarding this, namely when the established firm uses the strategy to deter the prospective entrant, the strategy is whether to cause excess capacity. Based on this kind of mentality, this article first in Forward analyzes the actual situation and concrete characteristics of excess capacity since 2005 in our country, pointing out the excess capacity is the product of market economy. Subsequently, the article in chapter 1 reviews domestic and foreign excess capacity literature. Foreign literatures mainly use of game theory and econometric model to analyze the relationship between the excess capacity strategy and the enterprises'entry, and domestic literatures mainly expounds factors or reasons of excess capacity from the investment system and the system of the industrial structure. This paper examines the impact on excess capacity when the established firm using the excess capacity strategy to discourage potential manufacturers from the competitive enterprise strategy. The paper in chapter 2 discusses the correlations between excess capacity strategy and excess capacity, and subsequently proposes the micro-examination model of excess capacity from enterprise competitive strategy on the general SCP model. Then, in this foundation, the author used 10 industrial panel data empirically analyzing the relations between the excess capacity strategy and the entry of prospective firms, confirms the excess capacity strategy's effect as an enter-barrier in deterring the prospective entrant. Afterwards, using the game theory the paper theoretically analyzed the two cases on the condition of strategic substitute and strategic complement when the established firm used the excess capacity strategy to deter the prospective entrant and produced some conclusions. When the established firm has the absolute cost superiority, namely when c1/c2<(ε-1)/εit certainly cannot use the excess capacity strategy under other same level conditions, and the prospective entrant is paying no attention to entry. When the established firm does not have the absolute cost superiority, namely when c1/c2≥(ε-1)/ε, in order to obtain bigger market share, it can choose the excess capacity strategy to deter the prospective entrant's entering. On strategic substitute, it can't cause excess capacity, on strategic complement, the industry excess capacity forms.Strategic substitute and strategic complement are of two different characteristics of the market structure. For strategic substitute, the marginal return of the established firm decreases with outputs of the prospective entrant, for strategic complement, the marginal return of the established firm increases with outputs of the prospective entrant. In fact, strategic substitute or strategic complement mainly depends on the market demand curve. Generally speaking, the linear demand function representatives strategic substitute, Quadratic curve demand function representatives complementary strategy. How to determine on certain market conditions strategic substitute or strategic complement will be an important development direction of this area in the future.In view of the actual situation and concrete characteristics of excess capacity in our country, with the results obtained by the economic theory analyzing, the article puts forward to some suggestions on slowing current excess capacity. As for the macroscopic economy control section, its main aim is to control the investment production scale and consummate pricing mechanism of the element of production. Whether strategic substitute or strategic complement, the established firm has to make certain productivity levels of investment as a prerequisite when using the excess capacity strategy. According to China's special conditions, the fixed assets investment level is basically based on the local government and the banking industry, and the flamboyant performance and the psychological motive of the local government facilitate access to investment opportunities provided for manufacturers. The bank and the government keep inextricably links. This is not consistent with the laws of market economy and results in non-economic enterprise "soft budget constraint" exacerbated. This requires transforming the local authority function, deepening administration organizational reform, especially optimizing and consummating the local government investment system and the achievements assessing indexes. Simultaneously it must be needed to gradually improve the pricing mechanism of some important elements of production, and argue vigorously multiplication and marketing. Most of excess capacity industries focus on some heavy chemical industries. These industries heavily depend on the production elements, such as steel, calcium carbide and coal. In China, land and mining rights belongs to the state, the local government approves to use, has no sound pricing mechanism of some important elements of production. Unreasonable pricing mechanism of the production elements leads to production elements overcrowding in some enterprises. So strengthening of industrial land use review, and developing the pricing system of exploiting natural resources as soon as possible and preventing these enterprises overcrowding in the industry which have not financial and technical strength but take advantage of rent-seeking opportunities to entry have also significant role in the prevention of excess production capacity. As for the microscopic firms, the excess capacity strategy certainly isn't always the best strategy, and the firm's best strategy should be strengthening the technical innovation and implementing industry promotion strategy. This kind of technical innovation not only reduces the firm's production cost, thus making the established firm have one kind of absolute cost superiority and lie in the first-moved occupies in the competition, but also stimulates production innovation. The technical innovation impetuses production innovation, and the promotion products have higher attachment value, thus making them changed from "too much" to "not much". At last, the market withdrawal mechanism also is a way of slowing excess capacity. As an integrated and mature market, to many industries, entry and withdrawal of firms should only be affected by the market force but not be intervened by other administrative strengths. |
