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Optimal pricing of postal services under endogenously determined entry

Author

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  • Kevin M. Currier

    () (Oklahoma State University)

Abstract

Postal reform (liberalization) is occurring rapidly around the world, perhaps most notably in the EU where January 1, 2011 was the date of Full Market Opening (FMO). As a strategy for maintaining the Universal Service Obligation (USO) under FMO, several authors suggest that the sale of access to competitive entrants may provide the universal service provider with significant opportunities to enhance revenues. In a single postal product context, Crew and Kleindorfer (2011) provide conditions under which competitive entry via access is welfare superior to entry via bypass (the Theorem on the Superiority of Access). In this paper, we show that in the single product context, the Laspeyres price cap-based regulatory adjustment process of Vogelsang and Finsinger (1979) may be adapted to determine optimal access-inducing prices, thereby fulfilling the USO efficiently. We also discuss a number of potential problems associated with extending the Theorem on the Superiority of Access and the Vogelsang-Finsinger price capping procedure to a multiproduct context.

Suggested Citation

  • Kevin M. Currier, 2012. "Optimal pricing of postal services under endogenously determined entry," Economics Bulletin, AccessEcon, vol. 32(4), pages 3503-3511.
  • Handle: RePEc:ebl:ecbull:eb-12-00045
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I4-P337.pdf
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    References listed on IDEAS

    as
    1. Bloch Francis & Gautier Axel, 2008. "Access Pricing and Entry in the Postal Sector," Review of Network Economics, De Gruyter, pages 1-24.
    2. Brennan, Timothy J, 1989. "Regulating by Capping Prices," Journal of Regulatory Economics, Springer, vol. 1(2), pages 133-147, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Postal liberalization; access; bypass; universal service obligation; price cap;

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L8 - Industrial Organization - - Industry Studies: Services

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