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Liberalization of the Swiss Letter Market and the Viability of Universal Service Obligations

  • Christian Jaag

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We discuss the ongoing liberalization process in the market for addressed letter mail in Switzerland. The core of the paper is an assessment of the liberalization’s impact on the financial viability of various universal service obligations with and without access to the incumbent’s downstream delivery network for customers and competitors. We propose a simple calibrated model of the Swiss letter market offering theoretical insights into the mechanics of market opening along with quantitative conclusions bearing direct policy relevance. The extent of the entrants’ market coverage and the equilibrium in the resulting price competition are endogenously determined. Our simulations suggest caution in introducing full market opening. For the scenarios considered, the model shows that either the burden of the uso must be reduced (e.g. with respect to the frequency and the coverage of delivery and / or through price differentiation). Alternatively, other means of assuring financial stability of Swiss Post must be sought, be it through external funds or demand stimulation through new products, possibly in the worksharing domain.

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File URL: http://www.swiss-economics.ch/RePEc/files/0006Jaag.pdf
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Paper provided by Swiss Economics in its series Working Papers with number 0006.

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Date of creation: Feb 2007
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Publication status: Published in Swiss Journal of Economics and Statistics 143(3), 261-282.
Handle: RePEc:chc:wpaper:0006
Contact details of provider: Web page: http://www.swiss-economics.ch
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  1. Beat Friedli & Christian Jaag & Daniel Kraehenbuehl & Ole Bach Nielsen & Søren-Michael Pihl & Urs Trinkner, 2006. "Consumer preferences and last mile pricing in the postal sector," Working Papers 0004, Swiss Economics, revised Jul 2006.
  2. Christian Jaag & Urs Trinkner, 2008. "Pricing in Competitive Two-Sided Mail Markets," Chapters, in: Competition and Regulation in the Postal and Delivery Sector, chapter 10 Edward Elgar.
  3. Barros, Pedro Luis Pita & Hoernig, Steffen & Valletti, Tommaso, 2001. "Universal Service and Entry: the Role of Uniform Pricing and Coverage Constraints," CEPR Discussion Papers 2789, C.E.P.R. Discussion Papers.
  4. Helmut M. Dietl & Urs Trinkner & Reto Bleisch, 2004. "Liberalization and Regulation of the Swiss Letter Market," Working Papers 0001, Swiss Economics, revised Jul 2005.
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