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Subadditivity and Contestability in the Postal Sector: Theory and Evidence

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  • Toufic M. El Masri

    () (Institute of Economics, Leuphana University of Lüneburg, Germany)

Abstract

Several studies have been conducted to analyze whether a regulation of the postal sector as a monopoly is actually efficient by examining its cost structure. The authors detected significant scale economies only in the delivery function and hence demonstrated a necessity for competition in the upstream operations. The primary purpose of this paper is to summarize the basic conditions of natural monopoly theory and to review the approaches and results of the studies dealing with this topic. Despite the importance of contestability in this context, previous literature concentrates only on the subadditivity aspect. The existence of economies of scale does not inevitably justify a governmental maintenance of the monopoly if the market is contestable. In this respect, further research is needed in order to account for contestability.

Suggested Citation

  • Toufic M. El Masri, 2011. "Subadditivity and Contestability in the Postal Sector: Theory and Evidence," Working Paper Series in Economics 195, University of Lüneburg, Institute of Economics.
  • Handle: RePEc:lue:wpaper:195
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    More about this item

    Keywords

    Postal Sector; Scale Economies; Subadditivity; Contestability;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L97 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Utilities: General
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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