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

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Jaag, Christian

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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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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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Find related papers by JEL classification:
H4 - Public Economics - - Publicly Provided Goods
L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets

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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. [Downloadable!] (restricted)
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