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Practical Approaches to USO Costing and Financing


  • Christian Jaag


  • John Lisle
  • Navin Waghe
  • Erik van der Merwe
  • Urs Trinkner



In this paper we set out a holistic approach that incorporates recent developments in assessing the net cost of the USO and presents a robust methodology for practical implementation. We analyse the issues relating to assessing the net costs of the USO with particular focus on the benefits associated with USO and current empirical approaches to calculating the net costs. We then present an overview of approaches that have been applied in various countries and highlight their strengths and shortcomings in light of the necessarily theoretical aspects discussed in the first part of the paper. Finally, we present a practical approach that we believe assesses robustly the net cost of the USO.

Suggested Citation

  • Christian Jaag & John Lisle & Navin Waghe & Erik van der Merwe & Urs Trinkner, 2010. "Practical Approaches to USO Costing and Financing," Working Papers 0021, Swiss Economics.
  • Handle: RePEc:chc:wpaper:0021

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    References listed on IDEAS

    1. C. Jaag & U. Trinkner, 2009. "Tendering Universal Service Obligations in Liberalized Network Industries," Competition and Regulation in Network Industries, Intersentia, vol. 10(4), pages 313-333, December.
    2. Christian Jaag, 2007. "Liberalization of the Swiss Letter Market and the Viability of Universal Service Obligations," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 143(III), pages 261-282, September.
    3. Martin Buser & Christian Jaag & Urs Trinkner, 2008. "Economics of Post Office Networks: Strategic Issues and the Impact on Mail Demand," Chapters,in: Handbook of Worldwide Postal Reform, chapter 5 Edward Elgar Publishing.
    4. Christian Jaag & Martin Koller & Urs Trinkner, 2009. "Calculating the Cost of the Universal Service Obligation: The Need for a Global Approach," Chapters,in: Progress in the Competitive Agenda in the Postal and Delivery Sector, chapter 8 Edward Elgar Publishing.
    5. Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-366, May.
    6. C. Jaag & U. Trinkner & J. Lisle & N. Waghe & E. Van Der Merwe, 2011. "Practical Approaches to USO Costing and Financing," Competition and Regulation in Network Industries, Intersentia, vol. 12(2), pages 108-130, June.
    7. Helmuth Cremer & Philippe De Donder & François Boldron & Bernard Roy, 2008. "Social Costs and Benefits of the Universal Service Obligation in the Postal Market," Chapters,in: Competition and Regulation in the Postal and Delivery Sector, chapter 2 Edward Elgar Publishing.
    8. Christian Jaag, 2010. "Compensating the Net Cost of Universal Postal Services," Working Papers 0017, Swiss Economics.
    9. Harstad, Ronald M & Crew, Michael A, 1999. "Franchise Bidding without Holdups: Utility Regulation with Efficient Pricing and Choice of Provider," Journal of Regulatory Economics, Springer, vol. 15(2), pages 141-163, March.
    10. Christian Jaag & Urs Trinkner, 2011. "The interaction between universal service costing and financing in the postal sector: a calibrated approach," Journal of Regulatory Economics, Springer, vol. 39(1), pages 89-110, February.
    11. A. Michael Spence, 1977. "Entry, Capacity, Investment and Oligopolistic Pricing," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 534-544, Autumn.
    12. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March.
    13. Claire Borsenberger & Helmuth Cremer & Philippe De Donder & Denis Joram & Bernard Roy, 2010. "Funding the cost of universal service in a liberalized postal sector," Chapters,in: Heightening Competition in the Postal and Delivery Sector, chapter 14 Edward Elgar Publishing.
    14. Valletti, Tommaso M & Hoernig, Steffen & Barros, Pedro P, 2002. "Universal Service and Entry: The Role of Uniform Pricing and Coverage Constraints," Journal of Regulatory Economics, Springer, vol. 21(2), pages 169-190, March.
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    16. Richard Gilbert & Xavier Vives, 1986. "Entry Deterrence and the Free Rider Problem," Review of Economic Studies, Oxford University Press, vol. 53(1), pages 71-83.
    17. Robert Cohen & Charles McBride & John C. Panzar, 2010. "The cost of the USO in the United States," Chapters,in: Heightening Competition in the Postal and Delivery Sector, chapter 16 Edward Elgar Publishing.
    18. Crew, Michael A & Kleindorfer, Paul R, 1998. "Efficient Entry, Monopoly, and the Universal Service Obligation in Postal Service," Journal of Regulatory Economics, Springer, vol. 14(2), pages 103-125, September.
    19. Panzar, John C., 2000. "A methodology for measuring the costs of universal service obligations," Information Economics and Policy, Elsevier, vol. 12(3), pages 211-220, September.
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    Cited by:

    1. Jaag Christian, 2011. "Entry Deterrence and the Calculation of the Net Cost of Universal Service Obligations," Review of Network Economics, De Gruyter, vol. 10(1), pages 1-19, March.

    More about this item


    Regulation; Post; Universal service obligation; Financing;

    JEL classification:

    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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