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Access Pricing and Entry in the Postal Sector

  • Francis Bloch

    ()

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

  • Axel Gautier

    ()

    (CORE - Université cathololique de Louvain - CORE - Université cathololique de Louvain (UCL))

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.

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Paper provided by HAL in its series Working Papers with number halshs-00411358.

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Date of creation: 2006
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Handle: RePEc:hal:wpaper:halshs-00411358
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00411358/en/
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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, M. & Doyle, C. & Vickers, J., 1995. "The access pricing problem: a synthesis," Discussion Paper Series In Economics And Econometrics 9532, Economics Division, School of Social Sciences, University of Southampton.
  3. Kaniska Dam & Axel Gautier & Manipushpak Mitra, 2007. "Efficient Access Pricing and Endogenous Market Structure," Working papers DTE 384, CIDE, División de Economía.
  4. Laffont, Jean-Jacques & Tirole, Jean, 1992. "Access Pricing and Competition," IDEI Working Papers 19, Institut d'Économie Industrielle (IDEI), Toulouse.
  5. Mark Armstrong, 2001. "Access Pricing, Bypass, and Universal Service," American Economic Review, American Economic Association, vol. 91(2), pages 297-301, May.
  6. De Donder, Philippe, 2006. "Access Pricing in the Postal Sector," IDEI Working Papers 319, Institut d'Économie Industrielle (IDEI), Toulouse.
  7. Philippe Donder, 2006. "Access Pricing in the Postal Sector: Theory and Simulations," Review of Industrial Organization, Springer, vol. 28(3), pages 307-326, 05.
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