Universal Service Obligation and Loyalty Effects: An Agent-Based Modelling Approach
AbstractIn network industries, a Universal Service Obligation (USO) is often seen as a burden on an incumbent, which requires compensation for the net cost of such service provision. This paper estimates the effects of consumer loyalty as an intangible benefit of USO in the postal sector. In doing so, the agent-based modelling (ABM) approach is applied, which makes it possible to model the behaviour of boundedly rational consumers and is thus particularly appropriate for taking into account intangibles considerations. The analysis shows that loyalty is crucial to whether the USO uniform pricing constraint results in loss-making or profitability. Under certain conditions and in the presence of a loyalty parameter, uniform pricing gives a USO provider an advantage, when the size of the rural area is sufficiently big and a disadvantage, if its size is too small. This finding is counterintuitive as USO providers in countries with sparsely populated areas are typically expected to incur a significant net cost of USO.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 48549.
Date of creation: 2012
Date of revision:
Publication status: Published in Yearbook of Antitrust and Regulatory Studies 2012.5(7)(2012): pp. 125-141
agent-based modelling; liberalisation of the postal markets; postal sector; Universal Service Obligation (USO); USO provider;
Find related papers by JEL classification:
- K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-28 (All new papers)
- NEP-CMP-2013-07-28 (Computational Economics)
- NEP-COM-2013-07-28 (Industrial Competition)
- NEP-REG-2013-07-28 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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"Welfare and Pricing of Mail in a Communications Market,"
Review of Network Economics,
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- Cremer, Helmuth & De Donder, Philippe & Dudley, Paul & Rodriguez, Frank, 2010. "Welfare and Pricing of Mail in a Communications Market," TSE Working Papers 10-148, Toulouse School of Economics (TSE).
- Christian Jaag & Urs Trinkner, 2011. "The interaction between universal service costing and financing in the postal sector: a calibrated approach," Journal of Regulatory Economics, Springer, vol. 39(1), pages 89-110, February.
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