China Telecom The Price Control Study

In order to realize the reforming aim of breaking out monopoly and drawing into competition, China government adopted the policy of asymmetric price regulation at the beginning of telecommunication industry reform. This paper aims at this policy, exerts principal of Game Theory, analyzes the behavior choice between firm and firm, firm and government and effect on telecommunication reform by setting up model and takes mobile telephone-service as an example. By the Game Theory analysis, this paper shows that under complete information condition, taking care both aiming of increase in national value and aiming of offering general service (or industrial development) will lead to the dynamic anti-consistency of government telecommunications industry policy undoubtedly and will lead to invalidation of policy of asymmetric price regulation further. Under the condition of invalidation of policy of asymmetric price regulation, for the asymmetric competition between original firms and new ones, there needs a long process of new firms enlarging their market share. But for the exerting of competition and the yield increasing of market, the price descending, consumer surplus increasing, the consumer gain the benefit of telecommunication reform. The example improved the following conclusion: because the telecommunication firms are still government-owned firms, or at least government occupied much more shares , government will face the benefit conflict when it manages the telecommunication firms. The most outstanding part is the conflict between competition aiming and increase in national value. Also this paper points out that there is an alliance relation between china's telecommunication forms and government management department. This research shows that the policy of asymmetric price regulation did not be executed strictly, so it did not work well, but lead to price competition between forms at some degree.