Study on Excess Capacity Based on Game among Enterprises

Abstract

This paper, combined with the game theory and model deduction, builds mathematical model for the two game situations which cause the expansion of production. The results show that the increasing number of enterprises will lead to the expansion of production. Besides, facing to competition who wants to entry their industry, incumbent firms will take super capacity production measures to raise entry barriers. In order to control the number of existing enterprises and encourage the development of enterprises which are low consumption and high efficiency, this paper puts forward forewarning model of the production efficiency based on DEA(Data Envelopment Analysis), a reasonable assessment of the enterprise's production efficiency. Furthermore, this paper uses the control variable method to quantify enterprises' reasonable investment and production, providing a mathematical basis for enterprises to improve production efficiency.