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Access Pricing and Entry in the Postal Sector

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Author Info
Francis Bloch
Axel Gautier

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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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Paper provided by Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège in its series CREPP Working Papers with number 0606.

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Date of creation: 2006
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Handle: RePEc:rpp:wpaper:0606

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  1. DAM, Kaniska & GAUTIER, Axel & MITRA, Manipushpak, 2007. "Efficient access pricing and endogenous market structure," CORE Discussion Papers 2007004, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  2. Jean-Jacques Laffont & Jean Tirole, 2001. "Competition in Telecommunications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262621509.
  3. GAUTIER, Axel & MITRA, Manipushpak, 2003. "Regulation of an open access essential facility," CORE Discussion Papers 2003084, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
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  4. Philippe Donder, 2006. "Access Pricing in the Postal Sector: Theory and Simulations," Review of Industrial Organization, Springer, vol. 28(3), pages 307-326, 05. [Downloadable!] (restricted)
  5. 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. [Downloadable!] (restricted)
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  6. Jean-Jacques Laffont & Jean Tirole, 1994. "Access Pricing and Competition," Working papers 94-31, Massachusetts Institute of Technology (MIT), Department of Economics.
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  7. De Donder, Philippe, 2006. "Access Pricing in the Postal Sector," IDEI Working Papers 319, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
  8. Armstrong, Mark & Doyle, Chris & Vickers, John, 1996. "The Access Pricing Problem: A Synthesis," Journal of Industrial Economics, Blackwell Publishing, vol. 44(2), pages 131-50, June. [Downloadable!] (restricted)
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  9. Mark Armstrong, 2001. "Access Pricing, Bypass, and Universal Service," American Economic Review, American Economic Association, vol. 91(2), pages 297-301, May. [Downloadable!] (restricted)
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