A Study on the Excessive Competition of Circulation Organizations

Excessive competition is a major obstacle for healthy operation of circulation industry. From two angles of product homogeneity and product differentiation, and by using expanded Bertrand model and Salop model, this article shows that excessive competition in circulation industry is bound to occur. Namely, the character of free access to circulation industry induces excessive competition. Then by using Stackelberg model and conducting inter-period analysis, the paper points out that suitable investment level can prevent the potential entrants and avoid the emergence of excessive competition. Finally, this paper shows that the government agency must play an important guiding role in promoting the effective competition of circulation industry so as to advance the national economy, and it needs to: a) encourage conglomeration and merger of circulation enterprises in order to set up large enterprise groups; b) make great efforts to develop chain operation; and c) reduce the withdrawal cost of circulation enterprises.