Title

Pre-commitment vs. flexibility: Uncertainty and distribution reform in P.R. China

Document Type

Journal article

Source Publication

The Journal of Socio-Economics

Publication Date

1997

Volume

26

Issue

1

First Page

59

Last Page

78

Publisher

Elsevier

Abstract

Chinese economic reform is remarkably different from the East European reforms in which the Chinese model emphasizes competition over privatization. This paper explains why Chinese distribution reform is successful although the Chinese government has made no attempt in privatizing her inefficient state-owned enterprises. By extending Coughlan's (1985) price competition model to endogenize the pre-commitment versus flexibility decision, it is shown that reducing uncertainty can encourage enterprises to pre-commit their investment which allows further development of the retail sectors. This result supports the gradual pace of distribution reform policy of China. By contrast, the “revolutionary” East European model inevitably creates high uncertainty in the society and enterprises are unwilling to pre-commit their investment.

DOI

10.1016/S1053-5357(97)90052-4

Print ISSN

10535357

E-ISSN

18791239

Publisher Statement

Copyright © 1997 by JAI Press, Inc.

Access to external full text or publisher's version may require subscription.

Full-text Version

Publisher’s Version

Recommended Citation

Chow, C.K.W. (1997) Pre-commitment vs. flexibility: Uncertainty and distribution reform in P.R. China. The Journal of Socio-Economics, 26(1), 59-78. DOI: doi:10.1016/S1053-5357(97)90052-4