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Innovation in the Swiss mail sector: deregulation versus liberalization

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  • Christian Jaag

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Abstract

In this paper we discuss an incumbent postal operator’s incentives to invest in an innovation in the face of upcoming liberalization and deregulation of the letter market. Our contribution is a short description of recent innovations in the Swiss mail market and their interpretation in light of an illuminative yet tractable model. Following the literature, we distinguish between product and process innovation. We characterize competitive pressure by a reduction in the incumbent’s market share and an increase of his/her perceived price elasticity of demand due to consumers’ switching to competitors. This may result in adverse incentives to invest in an innovation. Likewise, deregulation leads to increased entrepreneurial freedom on the operator’s side and possibly a lower burden of USO (universal service obligations), reflected in lower cost. This sustains incentives to invest in both product and process innovation.

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File URL: http://www.swiss-economics.ch/RePEc/files/0009Jaag.pdf
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Bibliographic Info

Paper provided by Swiss Economics in its series Working Papers with number 0009.

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Date of creation: Dec 2007
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Publication status: Published in International Journal of Regulation and Governance 7(2), 147–156.
Handle: RePEc:chc:wpaper:0009

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Web page: http://www.swiss-economics.ch
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Keywords: post; liberalization; privatization; regulation;

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  1. Aghion, Philippe & Blundell, Richard & Griffith, Rachel & Howitt, Peter & Prantl, Susanne, 2006. "The effects of entry on incumbent innovation and productivity," Discussion Papers, Research Unit: Competition and Innovation SP II 2006-18, Social Science Research Center Berlin (WZB).
  2. Philippe Aghion & Nicholas Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2002. "Competition and Innovation: An Inverted U Relationship," NBER Working Papers 9269, National Bureau of Economic Research, Inc.
  3. Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1999. "Competition, Financial Discipline and Growth," Review of Economic Studies, Wiley Blackwell, vol. 66(4), pages 825-52, October.
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Cited by:
  1. Martin Maegli & Christian Jaag & Matthias Finger, 2009. "Coûts de la régulation des industries de réseau: enseignements du réseau postal," Working Papers 0015, Swiss Economics.

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