Munich Personal RePEc Archive

Industrial Specific Resource Allocation, Incentive Differentiation and Industrial Development Order: the Function Evolvement of Jiangsu Laver Association in Anti-Trade Barrier Litigation

Zheng, Jianghuai and Jiang, Jing (2006): Industrial Specific Resource Allocation, Incentive Differentiation and Industrial Development Order: the Function Evolvement of Jiangsu Laver Association in Anti-Trade Barrier Litigation.

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Abstract

For sake of actualizing anti-trade barrier and changing the situation of price war after China’s taking part in WTO, Jiangsu laver association was founded. By using the Bayesian Cournot model, this paper analyzes the basis of trade association’s foundation is the ability of improving product quality and technique which is distributed heterogeneously in the firm of the industry. The paper defines this kind of ability as industrial specific resources which are formed during the process of industrial competition and development. Actually they are potential rents and laver firms can acquire them selectively by laver association’s enforcement of transaction rules in laver exchange office. It changes the industrial competition from reducing quality and price to upgrading quality and price and forms the basis of association’s existence. Whether the function is strong or not depends on association’s understanding of industrial specific resources and incentive benefits which is given to the member firms. It is not that association comes into being by the appearance of industrial specific resources and dies because of disappearance of industrial specific resources, but that association uses industrial specific resource into firms and it can reach a kind of separated equilibrium during the competition of improving quality and raising price. Association improves the quality of transaction governance continually and keeps the separated equilibrium maintained steadily. It makes the whole industry in good development order.

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