Study On The Price Competition Among China Railway Express Firms Based On The Extended Hotelling Model

The announcement of "One Belt and One Road" initiative highlighted the strategic value of China Railway Express(CR Express),which aroused the enthusiasm of establishing and operating local CR Express lines throughout the country.New participants are constantly emerging,which has exacerbated the increasingly fierce competition.Under the situation of more lines and less goods supply,many CR Express operators have taken a series of measures to improve their competitiveness,like lowering price and improving service,in order to make operation normalized,high frequency and stable.Due to the slight differences among CR Express companies' service,game theory is applied to analyze the price competition and equilibrium results of CR Express companies,which is aimed at providing explanations for the operation behavior of the company and references for their management decisions.Through reading literature,doing field research,watching news as well as browsing reports,understand the overall development and the basic situations of CR Express,then further analyze its economic characteristics.Considering the spatial difference of CR Express service,the classic Hotelling price competition model are chosen,where the consignor utility,the cost and revenue of CR Express company were expanded to make the model more conformed to the actual situation of CR Express.Based on the properties and theorems of the non-cooperative equilibrium solution,the equilibrium price,market share and revenue of the company are figured out.The sensitivity analysis of the key parameters is carried out and the regularity of the change relationship is obtained.Finally,two representatives of CR Express,namely,CR Express(Chongqing)and CR Express(Chengdu),were chosen to verify the conclusions of the model analysis via calculation by Matlab,with the parameters of the model determined through field investigation and online public information search.Some suggestions for the development of CR Express companies were presented based on the findings.The research finds that one CR Express firm which wants to monopolize the market should lower its price than its competitors when there is no network externality.However,it's possible for companies with higher network externality to possess more market share with higher price than its competitors when network externality exists.Meanwhile,the existence of network externality aggravated the competition among CR Express companies.That is,CR Express companies are more motivated to adopt lower price strategies for higher market share,in order to expand the market base and lead to positive feedback.At the same time,the subsidy from local government is a strong support for the company to adopt a lower price strategy,thus the phenomenon of price war based on subsidies has emerged.With the location of the departure station is fixed,the CR Express firms can raise its price to add revenue when the terminal transport rate ascends,due to the increasing differentiation.Otherwise,the price should be cut down to avoid the decrease of market share.It's important for companies to enter the market earlier and have a prominent comparative advantage in the market with network externality.This is because one company's market share and profit will increase with the enhancement of itself and its competitor's network externality when the company has a comparative advantage and strong network externality,while its competitor's market share and profit will be cut down.The company can enhance its competitiveness by adopting flexible pricing and establishing horizontal alliances.Besides,the company with comparative advantages can further enhance the network externality to strengthen its superiority.