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Access pricing and entry in the postal sector

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  • BLOCH, Francis
  • GAUTIER, Axel

Abstract

Postal markets have been open to competition for a long time. But, with a few exceptions, the competitors of the incumbent postal operator are active on the upstream segments of the market -preparation, collection, outward sorting and transport of mail products. With the further steps planned in the liberalization process, there are new opportunities to extend competition to the downstream segments of the market -the delivery of mails. In the future, two business models will be possible for the new postal operators: (1) access: where the firm performs the upstream operations and uses the incumbent's delivery network and (2) bypass where the competing firm controls the entire supply chain and delivers mails with its own delivery network. These two options have different impacts on welfare and the profit of the incumbent operator. The choice between access and bypass depends on the entrant's delivery cost relative to the cost of buying access to the incumbent operator (the access price). In this paper, we derive optimal -welfare maximizing- stamp and access prices for the incumbent operator when these prices have an impact on the delivery method chosen by the entrant. We show how prices should be re-balanced when the entry method is considered as endogenous i.e. affected by the incumbent's prices.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2006065.

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Date of creation: 00 Jul 2006
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Handle: RePEc:cor:louvco:2006065

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Keywords: access; bypass; postal sector;

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References

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  1. E. Villemeur & Helmuth Cremer & Bernard Roy & Joëlle Toledano, 2007. "Worksharing, access and bypass: the structure of prices in the postal sector," Journal of Regulatory Economics, Springer, vol. 32(1), pages 67-85, August.
  2. Laffont, Jean-Jacques & Tirole, Jean, 1992. "Access Pricing and Competition," IDEI Working Papers 19, Institut d'Économie Industrielle (IDEI), Toulouse.
  3. Philippe Donder, 2006. "Access Pricing in the Postal Sector: Theory and Simulations," Review of Industrial Organization, Springer, vol. 28(3), pages 307-326, 05.
  4. De Donder, Philippe, 2006. "Access Pricing in the Postal Sector," IDEI Working Papers 319, Institut d'Économie Industrielle (IDEI), Toulouse.
  5. Axel Gautier & Manipushpak Mitra, 2008. "Regulation of an Open Access Essential Facility," Economica, London School of Economics and Political Science, vol. 75(300), pages 662-682, November.
  6. Kanishka Dam & Axel Gautier & Manipushpak Mitra, 2008. "Efficient Access Pricing and Endogenous Market Structure," CREPP Working Papers 0802, Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège.
  7. Mark Armstrong, 2001. "Access Pricing, Bypass, and Universal Service," American Economic Review, American Economic Association, vol. 91(2), pages 297-301, May.
  8. Armstrong, M. & Doyle, C. & Vickers, J., 1995. "The access pricing problem: a synthesis," Discussion Paper Series In Economics And Econometrics 9532, Economics Division, School of Social Sciences, University of Southampton.
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Cited by:
  1. BLOCH, Francis & GAUTIER, Axel, 2012. "Strategic bypass deterrence," CORE Discussion Papers 2012062, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Kevin M. Currier, 2012. "Optimal pricing of postal services under endogenously determined entry," Economics Bulletin, AccessEcon, vol. 32(4), pages 3503-3511.

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