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The Efficiency Costs of the Postal Monopoly: The Case of Third-Class Mail

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  • Lenard, Thomas M

Abstract

This paper provides an estimate of the efficiency costs of the letter monopoly for third-class bulk advertising, the Postal Service's second largest category of mail. Using market data from private mail carriers, excess costs to mailers in 1992 are estimated to be about $2.5 billion, almost one-third of the Postal Service's third-class mail revenues. These costs are the sum of (1) the allocative efficiency loss due to reduced output ($237 million); (2) the increased production costs due to non-cost-minimizing behavior ($712 million); and (3) transfers to postal labor ($1.511 billion). Total efficiency costs--the sum of (1) and (2)--are estimated to be about $950 million. Copyright 1994 by Kluwer Academic Publishers

Suggested Citation

  • Lenard, Thomas M, 1994. "The Efficiency Costs of the Postal Monopoly: The Case of Third-Class Mail," Journal of Regulatory Economics, Springer, vol. 6(4), pages 421-432, December.
  • Handle: RePEc:kap:regeco:v:6:y:1994:i:4:p:421-32
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    Cited by:

    1. R. Richard Geddes, 2005. "Policy Watch: Reform of the U.S. Postal Service," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 217-232, Summer.

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