The gains and losses of collusion: An empirical research on the market behaviors of China’s power enterprises
Abstract: Collusion is a
common behavior of oligarch enterprises aiming to get an advantage in market
competition. The purpose of the thesis is to use the empirical research methods
to explore positive or negative effects that the electricity generation
manufacturers’ collusion has caused at the macro level of Market Economy and
the micro level of enterprises’ behaviors.
Design/methodology/approach: The designed research model in the thesis is
an extension of Porter’s model (Porter, 1984). It applies a more advanced
measurement method, FIML. In the example of price bidding project that started
by electricity generation enterprises of China’s power industry, the thesis
analyzes the relevant price data of subordinate power plants of China’s five
power generation groups in pilots of price bidding Policy.
Findings: It is found in the thesis that power generation enterprises are
facing collusion issues in the market. To be exact, it is such a situation in
which non-cooperative competition and collusion alternate. Under the
competition, market is relatively steady, thus forming a lower network price.
It is helpful to the development of the whole industry. However, once Cartel is
formed, the price will rise and clash with power enterprises and
transmission-distribution companies concerning the interests conflicts. At the
same time, a higher power price will form in the market, making consumers
suffer losses. All of these are bad for industry development. Not only the
collusion of power enterprises affects power price but also the market power
that caused by long-time Cartel will reduce the market entrant in electricity
generation. Market resources are centralized in the hands of Cartel, causing a
low effective competition in the market, which has passive effects on users.
Implications: The empirical research also indicates that collusion
undoubtedly benefits the power enterprises that involved. As a cooperation
pattern, collusion can lead to the synergy between relevant companies. However,
collusion harms the benefits of other market entities. During the process of
enterprises creating common interests cooperatively, collusion may bring harm
to the outside industry.
Originality/value: According to the empirical research method, the thesis
takes China’s power industry for example to carry out research and show the
gains and losses of collusion from two levels, namely market economy level and
management level.
Author: Ruize Gao, Zhenji
Zhang, Ang Li, Chang Ran
Journal Code: jptindustrigg150092