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Optimal Worksharing Discounts

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  • Sherman, Roger

Abstract

Forty percent of first-class mail is workshared, meaning that mailers perform part of the postal service work, such as sorting, in exchange for a price discount. Here the optimal discount is shown to depend on whether mailers workshare all their mail. If they do, their marginal decisions will affect usage of the mail, and the normal Ramsey inverse-elasticity rule will apply. If they do not, and their marginal decision involves the amount of their worksharing, then worksharing supply elasticities play a role in the optimal discount. In the latter case, margins will be greater for workshared letters. Problems in balancing these solutions, and in estimating cost savings from worksharing, are also discussed. Copyright 2001 by Kluwer Academic Publishers

Suggested Citation

  • Sherman, Roger, 2001. "Optimal Worksharing Discounts," Journal of Regulatory Economics, Springer, vol. 19(1), pages 81-92, January.
  • Handle: RePEc:kap:regeco:v:19:y:2001:i:1:p:81-92
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    Cited by:

    1. 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.
    2. Joan Calzada, 2009. "Access charges under two-tier pricing," Journal of Regulatory Economics, Springer, vol. 35(3), pages 296-311, June.
    3. Joan Calzada, 2006. "Worksharing and Access Discounts in the Postal Sector with Asymmetric Information," Journal of Regulatory Economics, Springer, vol. 29(1), pages 69-102, January.
    4. Cremer, Helmuth & Roy, Bernard & Toledano, Joëlle & de Villemeur, Étienne, 2003. "Access Pricing and Imperfect Competition," IDEI Working Papers 217, Institut d'Économie Industrielle (IDEI), Toulouse.

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