| Affected by the global financial crisis, the demand for electricity across the country began to slide in November of 2008, while coal prices continued to rise, from 400 yuan/ton up to 1,000 yuan/ton. Consequently, that resulted in a substantial decline in the overall performance of the power industry. And the continuous escalation of conflicts between the coal and the electricity industry led the contract negotiations of power-generating coal to stall at the end of 2008. On researches of vertical related market, it is always an important issue how to make prices for intermediate goods. In recent years, although the government had issued a series of regulatory measures, for how to solve the contradiction between coal and electricity has failed to find an effective solution. It reflects the complexity of China's coal-electricity vertical related markets, while also reflects that the current policy-makers can not accurately grasp the contradictory nature. This paper argues that there are at lease three basic characteristics of China's coal-electricity vertical related markets: the presence of external market of coal which can affect the power-generating coal's negotiations between several major power generation groups and coal groups, the trend of vertical integration, and the asymmetric information caused by double volatility of demand for electricity and coal prices. These three basic characteristics will be significant factors for the efficiency of these vertical markets.By evaluating the efficiency of vertical markets, we can provide decision reference for choosing strategies of upstream and downstream firms and designing supervision programs of regulatory and anti-trust agencies. So the regulatory and antitrust mechanisms aiming at vertical related markets can be improved to achieve optimizing resources allocation, improving overall operating efficiency. Based on principles of welfare economics and vertical related market characteristics, this thesis proposes a theoretical framework for evaluating vertical related markets' efficiency. Based on bargaining theory, the efficiency of vertical related market with continuous monopoly power is analyzed, taking into account the impacts of many issues including the vertical market structure, information asymmetry, vertical externalities, bargaining patterns and regulatory policies and so on.The dissertation is organized as follows: Chapter 1, introduction. started from the reality of coal-electricity's contradiction, a few basic concepts involved in the research are defined. Then the practical and theoretical necessities for efficiency of vertical related markets are proposed.Chapter 2, literature reviews. This research is mainly based on some aspects of the theory of industrial organization, involving economic efficiency of market power and social welfare theories, vertical relations and social welfare researches, the efficiency of coal-electricity vertical related market researches, regulation theories based on vertical related relations and bargaining theories.Chapter 3, the theoretical framework of studying vertical related market's efficiency is established, namely, vertical related market structure-vertical conducts-vertical related market efficiency and welfare-vertical related market regulation. Based on theories of vertical multi-markets welfare measures, the efficiency benchmark of vertical related market is founded and is applied to a special vertical related market in which the upstream industry is involving exhaustible resources. According to above framework, the vertical related market is simply divided to three kinds: C-C, M-C or C-M, M-M or 0-0 or M-0 or 0-M. The results show that the welfares of first two kinds is indifference with that of single market, so there is no need for multi-markets welfare analysis. While for other kinds with successive monopoly power, multi-markets welfare analysis is necessary. And the conclusions of efficiency and welfare are closely related to the specific vertical arrangements (vertical separation or vertical integration) and assumptions of pricing behaviors in vertical related markets (unilateral pricing or bargaining). Then, this article analyzes the efficiency of several specific vertical market structures.After establishing the theoretical framework of vertical related market's efficiency, based on the assumption of bargaining pricing in successive monopoly vertical markets, the efficiency of China's coal-electricity vertical related markets with three important features are analyzed. In chapter 4, aiming at multiple use of coal resources and various trading methods of coal (long-term contracts and spot market transactions), considering the regulated price of generating power, the role of external choice in bargaining of generating coals is analyzed.Chapter 5, China's coal-electricity vertical related market is still as an example. Considering the regulated price of generating power, welfare effects of vertical integration are compared under the assumptions of different pricing methods. The incentives of internal choices for vertical integration and the possibility of vertical integration are discussed.Chapter 6, when there are private information (bilateral uncertainty) between upstream and downstream firms in vertical markets, how the efficiency can be affected. Some real reasons causing such bilateral uncertainty are discussed. Then relevant implications for regulatory policies are proposed.Chapter 7, conclusions and outlook. |
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