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Pricing by state-owned enterprises: the case of postal services

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  • R. Richard Geddes

    (Policy Analysis and Management, Cornell University, Ithaca, NY, USA)

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    Abstract

    Sappington and Sidak develop a model of state-owned enterprise (SOE) pricing behavior in which firms maximize a weighted average of revenues and profits. The model predicts that SOEs will lower prices in more-elastic markets and raise them in less-elastic markets if the weight they place on profit is positive. The Postal Reorganization Act of 1970 relaxed the institutional constraints on pricing by the US Postal Service, which allows a test of the Sappington-Sidak model. The model's predictions are broadly confirmed. Congress passed the Postal Accountability and Enhancement Act in 2006, which may help address some anticompetitive concerns in this industry. Copyright © 2008 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/mde.1420
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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

    Volume (Year): 29 (2008)
    Issue (Month): 7 ()
    Pages: 575-591

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    Handle: RePEc:wly:mgtdec:v:29:y:2008:i:7:p:575-591

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    Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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    1. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    2. David Sappington & J. Sidak, 2003. "Incentives for Anticompetitive Behavior by Public Enterprises," Review of Industrial Organization, Springer, vol. 22(3), pages 183-206, May.
    3. Brennan, Timothy J, 1990. "Cross-Subsidization and Cost Misallocation by Regulated Monopolists," Journal of Regulatory Economics, Springer, vol. 2(1), pages 37-51, March.
    4. Lott, Jr., John R., 1999. "Are Predatory Commitments Credible?," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226493558.
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