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Liberalization of the Swiss Letter Market and the Viability of Universal Service Obligations

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  • Jaag, Christian

Abstract

We discuss the ongoing liberalization process in the market for addressed letter mail in Switzerland. The core of the paper is an assessment of the liberalization's impact on the financial viability of various universal service obligations with and without access to the incumbent's downstream delivery network for customers and competitors. We propose a simple calibrated model of the Swiss letter market offering theoretical insights into the mechanics of market opening along with quantitative conclusions bearing direct policy relevance. The extent of the entrants' market coverage and the equilibrium in the resulting price competition are endogenously determined. Our simulations suggest caution in introducing full market opening. For the scenarios considered, the model shows that either the burden of the USO must be reduced (e.g. with respect to the frequency and the coverage of delivery and / or through price differentiation). Alternatively, other means of assuring financial stability of Swiss Post must be sought, be it through external funds or demand stimulation through new producs, possibly in the worksharing domain.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 6121.

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Date of creation: 06 Oct 2007
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Handle: RePEc:pra:mprapa:6121

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Keywords: Liberalization; Mail; Universal Service Obligation;

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References

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  1. Valletti, Tommaso M & Hoernig, Steffen & Barros, Pedro P, 2002. "Universal Service and Entry: The Role of Uniform Pricing and Coverage Constraints," Journal of Regulatory Economics, Springer, vol. 21(2), pages 169-90, March.
  2. Helmut M. Dietl & Urs Trinkner & Reto Bleisch, 2004. "Liberalization and Regulation of the Swiss Letter Market," Working Papers 0001, Swiss Economics, revised Jul 2005.
  3. Beat Friedli & Christian Jaag & Daniel Kraehenbuehl & Ole Bach Nielsen & Søren-Michael Pihl & Urs Trinkner, 2006. "Consumer preferences and last mile pricing in the postal sector," Working Papers 0004, Swiss Economics, revised Jul 2006.
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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.
  2. Helmut Dietl & Christian Jaag & Markus Lang & Urs Trinkner, 2010. "Competition and Welfare Effects of VAT Exemptions," Working Papers 0133, University of Zurich, Institute for Strategy and Business Economics (ISU).
  3. Martin Maegli & Christian Jaag & Matthias Finger, 2010. "Regulatory Governance Costs in Network Industries: Observations in Postal Regulation," Working Papers 0018, Swiss Economics.
  4. Martin Buser & Christian Jaag & Urs Trinkner, 2007. "Economics of Post Office Networks: Strategic Issues and the Impact on Mail Demand," Working Papers 0008, Swiss Economics, revised Dec 2007.
  5. Christian Jaag & Urs Trinkner, 2007. "Pricing in competitive two-sided mail markets," Working Papers 0007, Swiss Economics, revised Jul 2007.
  6. Maegli, Martin & Jaag, Christian, 2009. "Regulatory Governance Costs in Network Industries: Implicatins for postal Regulation," MPRA Paper 15309, University Library of Munich, Germany.
  7. Christian Jaag & Martin Koller & Urs Trinkner, 2008. "Calculating the Cost of the Universal Service Obligation: The Need for a Global Approach," Working Papers 0010, Swiss Economics, revised Jul 2008.
  8. Christian Jaag & Helmut Dietl & Urs Trinkner & Oliver Fürst, 2011. "Defending Mail Markets against New Entrants: An Application of the Defender Model," Working Papers 0027, Swiss Economics.
  9. Helmut M. Dietl & Urs Trinkner, 2008. "Developing Universal Postal Services in Latin America – an Economic Perspective," Working Papers 0012, Swiss Economics, revised Nov 2008.

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