An Analysis Of Collective Action Theory Of Lack Of Price In Rare Earth Industry In China

"The Middle East has oil, China has rare earth." China’s rare earth resource is not only has the first total resources, the first production, the first amount of the application, but also the first exports in the world. So, Chinese rare earth plays a pivotal role in the world’s rare earth market, Should have the pricing power of rare earth. While behind the Chinese rare earth quickly occupied the world market, Chinese rare earth enterprises are unfolding the "Chinese-style vicious competition", resulting in China’s rare earth industry lost the pricing power on the international market. In this paper, by measuring the Lerner Index, we found that most of the year Lerner index values are less than0.5, even as low as0.1, which indicates that China’s rare earth industry is really no pricing power. So, some scholars call this phenomenon "no monopoly pricing power" or "China big market paradox". The reason why China’s rare earth industry lost its international pricing power and its countermeasures has become a major issue concerned by the theorists and practitioners in our country.After the study of China’s rare earth industry pricing power issues through collective action theory, the article founds that this paradox does not exist. According to the key point of the collective action theory:"Unless a small group of persons, or unless there is coercion or some other special means to enable individuals to act in accordance with their common interest, rational, self-interested individuals will not seek to take actions to achieve their common or group interests." Combined with the development of rare earth industry, this paper argues that collective action is impossible to form in the China’s rare earth industry. Therefore, it is not hard to understand rare earth industry’s lacking of pricing power. Meanwhile, on the basis of collective action theory, the article did an empirical study of the factors affecting China’s rare earth industry pricing power. The conclusion is:the number of rare earth enterprises and organizational costs between enterprises has a negative impact on the rare earth industry pricing power; influential companies share and government rare earth policy has a positive impact on the rare earth industry pricing power; the number of rare earth enterprises and influential companies share are two most important factor affecting rare earth industry pricing power.Based on the above analysis, the paper proposed policy recommendations to compete for China’s rare earth industry pricing power, that is:improve the access threshold of rare earth industry, reduce the number of enterprises in the industry; cultivate large rare earth enterprises which has domestic and international influence, form cartels in the rare earth international market; reform the existing rare earth export quota system, establish rare earth reserve system; use the "selective incentives" to inspire enterprises within the industry, build the rare earth industry organizations and institution; accelerate the technological innovation in rare earth industry, enhance the value of rare earth products. Hope that through the policy measures can provide some reference for the research on the problem of pricing power of China’s rare earth industry, and promote the further researches on the theory of collective action.