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Liberalization of the Postal Service Market in Europe: Entry with Universal Service and Partial Coverage

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Author Info
Beschorner, Patrick Frank Ernst
Abstract

In the advent of postal market liberalization in several European countries we expect that the incumbent operators anticipate entry by competitors who are not required to offer universal service, i.e. coverage of the entire country and uniform pricing. The market for postal service exhibits stronger network effects than in telecommunications because of limited interconnection. In the present paper we model entrants which can opt for a partial geographical coverage and who enter with a higher service quality than the incumbent. This allows to predict possible deterrence or accommodating strategies by the incumbent. We show that dependent on the shape of the network costs and the network effects entrants may either offer a low quality in order to mitigate competition or offer a higher quality in order to restrict the entrant's geographical coverage. --

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Publisher Info
Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 08-122.

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Date of creation: 2008
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Handle: RePEc:zbw:zewdip:7512

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Related research
Keywords: regulation; liberalization; postal services;

Find related papers by JEL classification:
L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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  1. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1991. "Rigging The Lobbying Process: An Application Of The All- Pay Auction," Purdue University Economics Working Papers 1002, Purdue University, Department of Economics.
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  2. Chone, Philippe & Flochel, Laurent & Perrot, Anne, 2000. "Universal service obligations and competition," Information Economics and Policy, Elsevier, vol. 12(3), pages 249-259, September. [Downloadable!] (restricted)
  3. Chone, Philippe & Flochel, Laurent & Perrot, Anne, 2002. "Allocating and funding universal service obligations in a competitive market," International Journal of Industrial Organization, Elsevier, vol. 20(9), pages 1247-1276, November. [Downloadable!] (restricted)
  4. Rodriguez, Frank & Storer, David, 2000. "Alternative approaches to estimating the cost of the USO in posts," Information Economics and Policy, Elsevier, vol. 12(3), pages 285-299, September. [Downloadable!] (restricted)
  5. Stefan Lutz, 1997. "Vertical product differentiation and entry deterrence," Journal of Economics, Springer, vol. 65(1), pages 79-102, February. [Downloadable!] (restricted)
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  6. Donnenfeld, Shabtai & Weber, Shlomo, 1992. "Vertical product differentiation with entry," International Journal of Industrial Organization, Elsevier, vol. 10(3), pages 449-472, September. [Downloadable!] (restricted)
  7. Valletti, Tommaso M., 2000. "Introduction: Symposium on universal service obligation and competition," Information Economics and Policy, Elsevier, vol. 12(3), pages 205-210, September. [Downloadable!] (restricted)
  8. Panzar, John C., 2000. "A methodology for measuring the costs of universal service obligations," Information Economics and Policy, Elsevier, vol. 12(3), pages 211-220, September. [Downloadable!] (restricted)
  9. Hung, N. M. & Schmitt, Nicolas, 1988. "Quality competition and threat of entry in duopoly," Economics Letters, Elsevier, vol. 27(3), pages 287-292. [Downloadable!] (restricted)
  10. Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Blackwell Publishing, vol. 49(1), pages 3-13, January. [Downloadable!] (restricted)
  11. Shaked, Avner & Sutton, John, 1983. "Natural Oligopolies," Econometrica, Econometric Society, vol. 51(5), pages 1469-83, September. [Downloadable!] (restricted)
  12. Clark, Derek J & Riis, Christian, 1998. "Competition over More Than One Prize," American Economic Review, American Economic Association, vol. 88(1), pages 276-89, March. [Downloadable!] (restricted)
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