Explanation Of Excessive Competition In Entry And Exit Barriers

In recent years, the industrial organization in China has seen some positive changes along with rapid and sound economic growth. At the same time excessive competition in some industries has exposed affected by many a factor such as economic transformation. However the practice of economic growth has proved that: excessive competition has made output capacity idle, blocked the flow of scarce economic resource to other industries of more efficiency, thus been injurious to competition efficiency and order, affected economy scale and market performance. Finally, excessive competition reduces social welfare. This thesis tries to analyze the origin of excessive competition from the angle of entry and exit barriers on the background of industry development in China and find out basic thoughts to solve the problem of excessive competition.Currently, the characters of excessive competition in China are different from the description in existent literatures;(1)excessive competition is serious in some competitive industries of scale economy because of the existence of many small- and medium-sized enterprises whose level of scale economy is low and production is decentralized;(2)excessive competition appears in some natural monopoly industries in which price war is fierce and has become the only instrument of competition;(3)the state-owned enterprises also play an important role in excessive competition. The main reason which brought about problems above is that the barriers of entry and exit have changed under some special conditions, thus lost the function of hindering enterprises to enter and exit certain markets.First, analyzing on the entry barriers, we think that during the period of economy transformation, it is easier for enterprises to enter a new market by reducing requirements of scale economy and large capital, organizing production using advanced technology introduced from other countries and taking advantage of the effect of government. As a result, the enterprises of certain markets become more than being required and then it is possible for excessive competition to come into being. Second, analyzing on the exit barriers, we think it is the underdeveloped market system and social burden which increase the cost for enterprises to exit certain market. At the same time, close relationship with government on economy and politics also makes it difficult for enterprises to exit certain market. Another result is the superior can't be selected and the inferior can't be eliminated according to market competition law.In the end, the conclusion of this thesis is that the excessive competition in China currently is along with some certain conditions of economy transformation. And it is the government intervention that makes entry and exit barriers become invalid and that hinders productive factors flowing from less efficient enterprises to more efficient enterprises. Eventually, excessive competition appears. Therefore the principia resolving problem of excessive competition is to allow enterprises to make decisions according to their real conditions, and bring market competition system into play.