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
Language
English
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