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Retention Ratios in Retail Networks and Their Application to Post Offices

In: The Postal and Delivery Contribution in Hard Times

Author

Listed:
  • Matthias Hafner

    (Swiss Economics and University of Zurich)

  • Lory Iunius

    (University of Lausanne)

  • Urs Trinkner

    (Swiss Economics and University of Zurich)

Abstract

Diversion ratios indicate the fraction of demand that is “diverted” to another company. By analogy, we define retention ratios as the fraction of demand of a particular store or product that is “retained” within a company. In case of a post office closure, retention ratios express how much of the sales in the closed post offices are retained in the remaining post offices. Both retention ratios and diversion ratios are, although defined differently, closely linked to elasticity of demand relative to changes in prices and/or quality. Despite its considerable importance, there is a clear lack of research on diversion and retention ratios in the postal sector. In our paper, we contribute to the literature in three ways. We provide a review of the relevant literature on diversion and retention ratios for post office and retail networks as well as in merger cases. We identify existing estimates and relevant factors that drive the results. We then qualitatively limit possible ranges of retention ratios of post office closures. We validate our results by comparing empirical volume effects in Swiss Post’s restructured retail network between 2013 and 2019.

Suggested Citation

  • Matthias Hafner & Lory Iunius & Urs Trinkner, 2023. "Retention Ratios in Retail Networks and Their Application to Post Offices," Topics in Regulatory Economics and Policy, in: Pier Luigi Parcu & Timothy J. Brennan & Victor Glass (ed.), The Postal and Delivery Contribution in Hard Times, chapter 0, pages 99-109, Springer.
    • Handle: RePEc:spr:topchp:978-3-031-11413-7_7
    DOI: 10.1007/978-3-031-11413-7_7
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