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Innovation in the Swiss mail sector: deregulation versus liberalization

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  • Christian Jaag

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Abstract

In this paper we discuss an incumbent postal operator’s incentives to invest in an innovation in the face of upcoming liberalization and deregulation of the letter market. Our contribution is a short description of recent innovations in the Swiss mail market and their interpretation in light of an illuminative yet tractable model. Following the literature, we distinguish between product and process innovation. We characterize competitive pressure by a reduction in the incumbent’s market share and an increase of his/her perceived price elasticity of demand due to consumers’ switching to competitors. This may result in adverse incentives to invest in an innovation. Likewise, deregulation leads to increased entrepreneurial freedom on the operator’s side and possibly a lower burden of USO (universal service obligations), reflected in lower cost. This sustains incentives to invest in both product and process innovation.

Suggested Citation

  • Christian Jaag, 2007. "Innovation in the Swiss mail sector: deregulation versus liberalization," Working Papers 0009, Swiss Economics.
  • Handle: RePEc:chc:wpaper:0009
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    File URL: http://www.swiss-economics.ch/RePEc/files/0009Jaag.pdf
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    References listed on IDEAS

    as
    1. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 701-728.
    2. Philippe Aghion & Richard Blundell & Rachel Griffith & Peter Howitt & Susanne Prantl, 2009. "The Effects of Entry on Incumbent Innovation and Productivity," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 20-32, February.
    3. Philippe Aghion & Mathias Dewatripont & Patrick Rey, 1999. "Competition, Financial Discipline and Growth," Review of Economic Studies, Oxford University Press, vol. 66(4), pages 825-852.
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    Cited by:

    1. Martin Maegli & Christian Jaag & Matthias Finger, 2009. "Coûts de la régulation des industries de réseaux : enseignements du réseau postal," Revue d'économie industrielle, De Boeck Université, vol. 0(3), pages 47-68.

    More about this item

    Keywords

    post; liberalization; privatization; regulation;

    JEL classification:

    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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