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Access Pricing and Entry in the Postal Sector

Author

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  • Francis Bloch

    () (Ecole Polytechnique - Centre d'Econométrie (CECO))

  • Axel Gautier

    () (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain)

Abstract

Postal markets are open to competitor for a long time. But, with a few exceptions, the competitors of the incumbent postal operator are currently active on the upstream segments of the market -preparation,collection, outward sorting and transport of mail products. With the further steps planed 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 model will be possible for the new postal operators: (1) access: where the firm perform the upstream operations and uses the incumbent's deliverynetwork and (2) bypass where the competing firm controls the entire supply chain and delivers mails with its own delivery network. These two options have a different impact on both the welfare and the profitof the historical operator. In particular, bypass raises severe concerns for the financing of the universal service obligations.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'sprices.

Suggested Citation

  • Francis Bloch & Axel Gautier, 2006. "Access Pricing and Entry in the Postal Sector," Working Papers halshs-00411358, HAL.
  • Handle: RePEc:hal:wpaper:halshs-00411358 Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00411358
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    References listed on IDEAS

    as
    1. Philippe Donder, 2006. "Access Pricing in the Postal Sector: Theory and Simulations," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 28(3), pages 307-326, May.
    2. Laffont, Jean-Jacques & Tirole, Jean, 1994. "Access pricing and competition," European Economic Review, Elsevier, vol. 38(9), pages 1673-1710, December.
    3. De Donder, Philippe, 2006. "Access Pricing in the Postal Sector," IDEI Working Papers 319, Institut d'Économie Industrielle (IDEI), Toulouse.
    4. DAM, Kaniska & GAUTIER, Axel & MITRA, Manipushpak, 2007. "Efficient access pricing and endogenous market structure," CORE Discussion Papers 2007004, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Axel Gautier & Manipushpak Mitra, 2008. "Regulation of an Open Access Essential Facility," Economica, London School of Economics and Political Science, vol. 75(300), pages 662-682, November.
    6. Mark Armstrong, 2001. "Access Pricing, Bypass, and Universal Service," American Economic Review, American Economic Association, vol. 91(2), pages 297-301, May.
    7. Armstrong, Mark & Doyle, Chris & Vickers, John, 1996. "The Access Pricing Problem: A Synthesis," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 131-150, June.
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    Cited by:

    1. Keizo Mizuno & Ichiro Yoshino, 2015. "Overusing a bypass under cost-based access regulation: underinvestment with spillovers," Journal of Regulatory Economics, Springer, vol. 47(1), pages 29-57, February.
    2. DAM, Kaniska & GAUTIER, Axel & MITRA, Manipushpak, 2007. "Efficient access pricing and endogenous market structure," CORE Discussion Papers 2007004, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Gautier Axel & Paolini Dimitri, 2011. "Universal Service Financing in Competitive Postal Markets: One Size Does Not Fit All," Review of Network Economics, De Gruyter, vol. 10(3), pages 1-30, September.
    4. Francis Bloch & Axel Gautier, 2017. "Strategic bypass deterrence," Journal of Regulatory Economics, Springer, vol. 52(2), pages 189-210, October.
    5. Kevin M. Currier, 2012. "Optimal pricing of postal services under endogenously determined entry," Economics Bulletin, AccessEcon, vol. 32(4), pages 3503-3511.

    More about this item

    Keywords

    Postal economics; worksharing; access pricing;

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L87 - Industrial Organization - - Industry Studies: Services - - - Postal and Delivery Services

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