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Innovation in the Swiss mail sector: deregulation versus liberalization

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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.

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  • 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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    References listed on IDEAS

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    1. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 701-728.
    2. Philippe Aghion & Mathias Dewatripont & Patrick Rey, 1999. "Competition, Financial Discipline and Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(4), pages 825-852.
    3. 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.
    4. Philippe Aghion & Christopher Harris & Peter Howitt & John Vickers, 2001. "Competition, Imitation and Growth with Step-by-Step Innovation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(3), pages 467-492.
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    Cited by:

    1. Martin Maegli & Christian Jaag & Matthias Finger, 2009. "Co?ts de la r?gulation des industries de r?seau: enseignements du r?seau postal," Working Papers 0015, Swiss Economics.

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    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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