The Mailstream as a Platform

This paper interprets the postal mailstream as a platform with two market sides in a theoretical model: On the one side of the market, advertisers (senders of direct mail) and senders of transactional mail are customers for mail services. On the other side of the market, there are the recipients. The value of direct mail for its sender depends on the quality of the mailmix, i.e. the number of transactional mail items in the mailstream. Hence, there is an interdependency between the two types of mail. This interdependency effects the equilibrium allocation, especially optimal prices. The paper analyzes these effects in two frameworks: A postal monopoly and (direct) postal competition within the mailstream as a platform. It also discusses their implications for (indirect) competition with other communication platforms. A postal monopolist has a strong incentive to lower transactional mail's price in order to increase the mail platform's attractiveness for direct mail. Electronic substitution of transactional mail thwarts these efforts. In addition, direct competition degrades the mailmix because new postal operators tend to focus on bulk and direct, rather than transactional mail. Thereby, direct competition indirectly contributes to the substitution of direct mail.