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Liberalization of the Postal Service Market in Europe: Entry with Universal Service and Partial Coverage

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  • Beschorner, Patrick Frank Ernst

Abstract

In the advent of postal market liberalization in several European countries we expect that the incumbent operators anticipate entry by competitors who are not required to offer universal service, i.e. coverage of the entire country and uniform pricing. The market for postal service exhibits stronger network effects than in telecommunications because of limited interconnection. In the present paper we model entrants which can opt for a partial geographical coverage and who enter with a higher service quality than the incumbent. This allows to predict possible deterrence or accommodating strategies by the incumbent. We show that dependent on the shape of the network costs and the network effects entrants may either offer a low quality in order to mitigate competition or offer a higher quality in order to restrict the entrant's geographical coverage.

Suggested Citation

  • Beschorner, Patrick Frank Ernst, 2008. "Liberalization of the Postal Service Market in Europe: Entry with Universal Service and Partial Coverage," ZEW Discussion Papers 08-122, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:7512
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    References listed on IDEAS

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    1. Stefan Lutz, 1997. "Vertical product differentiation and entry deterrence," Journal of Economics, Springer, vol. 65(1), pages 79-102, February.
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    6. Chone, Philippe & Flochel, Laurent & Perrot, Anne, 2000. "Universal service obligations and competition," Information Economics and Policy, Elsevier, vol. 12(3), pages 249-259, September.
    7. Donnenfeld, Shabtai & Weber, Shlomo, 1992. "Vertical product differentiation with entry," International Journal of Industrial Organization, Elsevier, vol. 10(3), pages 449-472, September.
    8. Clark, Derek J & Riis, Christian, 1998. "Competition over More Than One Prize," American Economic Review, American Economic Association, vol. 88(1), pages 276-289, March.
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    More about this item

    Keywords

    regulation; liberalization; postal services;

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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