The price war between the China Mobile and China Unicom微观经济学英语论文.doc

The price war between the China Mobile and China UnicomWhen we graduated from high school, our parents would buy a mobile phone for us, because with a mobile phone, its much easier for us to communicate with our parents, and we can strength the links with our parents, parents can also know that we are well in the university. But, why can that happen? There is an industry that called mobile communication industry which makes our daily life more convenient than before. In the age of the information explosion, the mobile communication industry develops very fast. And the market is divided into two main parts, one is China Mobile, and the other is China Unicom. From the table, we can clearly see that, China Mobile has 670 millions users in 2012 which are 70% of the total users; China Unicom is much less than China Mobile. It only has 30% of the total users. But as time goes on, we can also conclude that China Unicom develop faster than China Mobil. Because the markets share of the China Mobile is decreasing but for China Unicom it is increasing. Now we know that the competition between the two companies is very fierce. Both of the company wants to attach more customers, so they reduce the price of the calls as much as they could, and they also introducing many new packages. In the internet, we can see that there are many packages that we can choose from. We can compare them on the internet, and then choose a package which is the most suitable package for us. For us students, we also chose a package. Because with the package we can not only have 1000 minutes to call our friends, but we can also get 250 hours free to surf the internet. It is good for us to save a lot of money. We are the beneficial of the competition. Above these we can easily conclude that the market of the mobile communication is oligopoly. Definition of the oligopoly is that a market structure in which only a few sellers offer similar or identical products. More exactly, its called duopoly. From the book, we have learned that in this situation the best way for the company to make biggest profit is to let the group of the firms acting in unison. Because it can help them make the best decision and help them get the biggest profit. But China Mobile and China Unicom dont do that. Now let us analyze the reasons of why they want to be in the price war? First, currently there exists a huge profit space in the mobile communication industry, this is the “capital” why both side have the courage to do that. We all know that, the population of China is very large. If one of the companies wins the war, it will get more profit than before. Second, both of the company wants to be the Number One. There is a famous saying that “Each France soldier carries a marshals baton in his knapsack”. In this situation, we can say that “If the company doesnt want to be the Number One, its not a good company”. For China Mobile, now it is the Number One, they think that if cooperate with the China Unicom, China Unicom will get more beneficial than them. It is bad to them. And in their heart, they have the superiority; they think that China Unicom cant exceed them. Such differences make both parties are mentally, no thought to reach a market-sharing agreement. Third policy stipulates that Unicom enjoy low on move 10% to 15% of the price concessions, but is it a requirement of the "point of agreement". Let Unicom difficult in execution in effect at play, and China Unicom. Once through a substantial price reductions, but also allow China Mobile angry - which is leading to a price war policy factors. Last they are all state-owned enterprises, although there are the points on the asset, but is a traditional soft about beam machine dual system made in the field of war fighting over city, double side are very less and streamline pity - this is a price war in the body is made from grain. Figure of the soft about beam is the corporate long period deposit at a disadvantage. For this reasons, they would rather compete in the price war rather than cooperate. Let we talk about China Unicom. For a later entrant, China Unicom should compete for the market share at the very beginning. Because no market, no profit, of course, not to mention the brand. Generally speaking, in the early stages of entering an industry, what is one of the most effective ways to compete for the market share is that lower prices to win customers. From the point of view the customers market share, the market share belonging to China Unicom is expanding rapidly. So China have to reduce the price in order to win the customers. As we know, this price war exists all the time. Well, is the “price war” in the mobile market good for the whole social welfare? Lets think about it.Enterprise profits and consumer surplus, these two parts constitute the social welfare. So we will analysis the influence, which price war gives to the whole social welfare, through observing the changes in consumer surplus and enterprise profits caused by price adjustments.When monopolists are in the price war, because the lower industry overall price level leads to bring more consume needs, manufacturers output level increases. For consumers, consumer surplus is bound to increase when the price decrease; in the other hand, for manufacturers, whether the profit level increase or not with the lower price, which is depends on price elasticity of demand. 待添加的隐藏文字内容3 Suppose that the elasticity is less than 1, when the price decreases from P to P, there will be the situation that the profit raise area of BCED that the increase of quantity brings to the enterprises is less than the profit decline area of P1ABP2 that the decrease of price brings to the enterprises. For the enterprises, the lower price damages their profits. But for customers, such as our students like you and me, the lower price still brings the increase area of PABP in the consumer surplus. And, for the whole social welfare, there still is the increase area of ADCE, which shows that though this situation will bring the enterprises the loss of profit possibly, it is of benefit to the whole society due to the increase of the social welfare.From the analysis, we can conclude that only if the monopolist dont put the price below the average cost in the competition, “price war” will be beneficial to social welfare. So, we should encourage that the enterprises decrease the price of mobile communications products and services through the competition.