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Efficient Entry, Monopoly, and the Universal Service Obligation in Postal Service

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  • Crew, Michael A
  • Kleindorfer, Paul R
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    Abstract

    This paper analyzes the nature of and justification for the Universal Service Obligation (USO) and its relationship to the Reserved Area for Postal Service. This is motivated by problems of funding the USO in the face of increasing competition in the postal sector. After reviewing various approaches to defining and funding the USO, we develop a model to consider the optimal scope of both the Reserved Area and the USO. The model assumes an incumbent postal provider and potential entrants. The incumbent is guaranteed a monopoly franchise for services in its Reserved Area R and offers services in a possibly larger set of services U at uniform prices. All services not in R face competition from entrants. We characterize the welfare-optimal scope of R and U subject to a breakeven constraint for the incumbent. Implications for USO policy are discussed in light of the results of the analysis. Copyright 1998 by Kluwer Academic Publishers

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    Bibliographic Info

    Article provided by Springer in its journal Journal of Regulatory Economics.

    Volume (Year): 14 (1998)
    Issue (Month): 2 (September)
    Pages: 103-25

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    Handle: RePEc:kap:regeco:v:14:y:1998:i:2:p:103-25

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    Web page: http://www.springerlink.com/link.asp?id=100298

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    Cited by:
    1. Damien Broussolle, 2007. "Full Market Opening In The Postal Services Facing The Social And Territorial Cohesion Goal In France," Working Papers of LaRGE Research Center 2007-07, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg (France).
    2. Calzada, Joan, 2009. "Universal service obligations in the postal sector: The relationship between quality and coverage," Information Economics and Policy, Elsevier, vol. 21(1), pages 10-20, February.
    3. Christian Jaag & Urs Trinkner, 2011. "The future of the USO - Economic rationale for universal services and implications for a future-oriented USO," Working Papers 0026, Swiss Economics.
    4. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
    5. Rodriguez, Frank & Storer, David, 2000. "Alternative approaches to estimating the cost of the USO in posts," Information Economics and Policy, Elsevier, vol. 12(3), pages 285-299, September.

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