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The impact of increasing competition for non-contract parcels on postal prices and efficiency decisions

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  • De Donder, Philippe
  • Rodriguez, Frank
  • Soteri, Soterios

Abstract

The increase in e-commerce and demand for parcels has provided universal postal operators (USPs) with an opportunity to counter-balance, to some extent, declining letter volumes. However, as parcel markets have expanded this has exposed some USPs to increasing competition in the single-piece parcel traffic segment in which historically they have tended to dominate. This chapter develops and calibrates a theoretical model to assess postal USPs’ finances resulting from the trade-offs they face between efficiency gains and pricing, when operating in such an environment within a regulatory framework. Our results indicate that increasing competition in the parcel market can create added uncertainty and may require higher letter price caps to allow the USP to break even. Sensitivity analysis shows that external shocks can have a substantial impact on the USP’s financial position and fixed pre-determined price caps can impose a significant constraint on the USP’s ability to achieve a normal rate of return.
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(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • De Donder, Philippe & Rodriguez, Frank & Soteri, Soterios, 2018. "The impact of increasing competition for non-contract parcels on postal prices and efficiency decisions," TSE Working Papers 18-923, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:32660
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    References listed on IDEAS

    as
    1. Philippe Donder & Frank Rodriguez & Soterios Soteri, 2018. "Pricing and Efficiency Decisions for Letter and Parcel Markets When Industrial Relations Matter," Topics in Regulatory Economics and Policy, in: Pier Luigi Parcu & Timothy Brennan & Victor Glass (ed.), The Contribution of the Postal and Delivery Sector, pages 241-255, Springer.
    2. Michael Crew & Timothy J. Brennan (ed.), 2016. "The Future of the Postal Sector in a Digital World," Topics in Regulatory Economics and Policy, Springer, number 978-3-319-24454-9, March.
    3. Pier Luigi Parcu & Timothy Brennan & Victor Glass (ed.), 2018. "The Contribution of the Postal and Delivery Sector," Topics in Regulatory Economics and Policy, Springer, number 978-3-319-70672-6, March.
    4. Timothy J. Brennan & Michael A. Crew, 2016. "Price Cap Regulation and Declining Demand," Topics in Regulatory Economics and Policy, in: Michael Crew & Timothy J. Brennan (ed.), The Future of the Postal Sector in a Digital World, pages 1-17, Springer.
    Full references (including those not matched with items on IDEAS)

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