Economic analysis of internal competition of coal industry in China

In this paper game theory and informative economics are both applied to analysis of the current situation of China’s coal industry, where over competition is rampant. By analyzing business decisions of two coal enterprises and then n coal enterprises under the condition of games, the conclusion is that coal enterprises can achieve maximum profits only through cooperation among themselves. While attempts by any individual coal enterprise to decide its own output and exceed its quota, which results in Nash equilibrium output, will not be able to bring about maximum profit. Finally, causes for the ineffectiveness of macro policies by China’s coal industry are probed into, and countermeasures are thereafter put forward.