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Access pricing and entry in the postal sector

  • BLOCH, Francis
  • GAUTIER, Axel

Postal markets have been open to competition for a long time. But, with a few exceptions, the competitors of the incumbent postal operator are active on the upstream segments of the market -preparation, collection, outward sorting and transport of mail products. With the further steps planned in the liberalization process, there are new opportunities to extend competition to the downstream segments of the market -the delivery of mails. In the future, two business models will be possible for the new postal operators: (1) access: where the firm performs the upstream operations and uses the incumbent's delivery network and (2) bypass where the competing firm controls the entire supply chain and delivers mails with its own delivery network. These two options have different impacts on welfare and the profit of the incumbent operator. The choice between access and bypass depends on the entrant's delivery cost relative to the cost of buying access to the incumbent operator (the access price). In this paper, we derive optimal -welfare maximizing- stamp and access prices for the incumbent operator when these prices have an impact on the delivery method chosen by the entrant. We show how prices should be re-balanced when the entry method is considered as endogenous i.e. affected by the incumbent's prices.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2006065.

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Date of creation: 00 Jul 2006
Date of revision:
Handle: RePEc:cor:louvco:2006065
Contact details of provider: Postal: Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium)
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  1. GAUTIER, Axel & MITRA, Manipushpak, 2003. "Regulation of an open access essential facility," CORE Discussion Papers 2003084, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Armstrong, Mark & Doyle, Chris & Vickers, John, 1996. "The Access Pricing Problem: A Synthesis," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 131-50, June.
  3. Kaniska Dam & Axel Gautier & Manipushpak Mitra, 2007. "Efficient Access Pricing and Endogenous Market Structure," Working papers DTE 384, CIDE, División de Economía.
  4. Philippe Donder, 2006. "Access Pricing in the Postal Sector: Theory and Simulations," Review of Industrial Organization, Springer, vol. 28(3), pages 307-326, 05.
  5. J-J. Laffont & J. Tirole, 1994. "Access Pricing and Competition," Working papers 95-11, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Mark Armstrong, 2001. "Access Pricing, Bypass, and Universal Service," American Economic Review, American Economic Association, vol. 91(2), pages 297-301, May.
  7. De Donder, Philippe, 2006. "Access Pricing in the Postal Sector," IDEI Working Papers 319, Institut d'Économie Industrielle (IDEI), Toulouse.
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