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

Research output: Journal PublicationsJournal Article (refereed)

1 Scopus Citations

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.
Original languageEnglish
Pages (from-to)59-78
Number of pages20
JournalThe Journal of Socio-Economics
Volume26
Issue number1
DOIs
Publication statusPublished - 1 Jan 1997
Externally publishedYes

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