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Access Pricing and Entry in the Postal Sector

Author

Listed:
  • Francis Bloch

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

  • Axel Gautier

    (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain = Catholic University of 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://shs.hal.science/halshs-00411358
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    References listed on IDEAS

    as
    1. Philippe Donder & Helmuth Cremer & Paul Dudley & Frank Rodriguez, 2006. "Pricing and Welfare Implications of Alternative Approaches to Setting Price Controls in the Postal Sector," Topics in Regulatory Economics and Policy, in: Michael A. Crew & Paul R. Kleindorfer (ed.), Progress toward Liberalization of the Postal and Delivery Sector, chapter 0, pages 227-247, Springer.
    2. Laffont, Jean-Jacques & Tirole, Jean, 1994. "Access pricing and competition," European Economic Review, Elsevier, vol. 38(9), pages 1673-1710, December.
    3. E. Villemeur & Helmuth Cremer & Bernard Roy & Joëlle Toledano, 2007. "Worksharing, access and bypass: the structure of prices in the postal sector," Journal of Regulatory Economics, Springer, vol. 32(1), pages 67-85, August.
    4. Michael A. Crew & Paul R. Kleindorfer, 2005. "Competition, Universal Service and the Graveyard Spiral," Topics in Regulatory Economics and Policy, in: Michael A. Crew & Paul R. Kleindorfer (ed.), Regulatory and Economic Challenges in the Postal and Delivery Sector, chapter 0, pages 1-30, Springer.
    5. Mark Armstrong, 2001. "Access Pricing, Bypass, and Universal Service," American Economic Review, American Economic Association, vol. 91(2), pages 297-301, May.
    6. Kaniska Dam & Axel Gautier & Manipushpak Mitra, 2007. "Efficient Access Pricing and Endogenous Market Structure," Working Papers DTE 384, CIDE, División de Economía.
    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.
    8. 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.
    9. De Donder, Philippe, 2006. "Access Pricing in the Postal Sector," IDEI Working Papers 319, Institut d'Économie Industrielle (IDEI), Toulouse.
    10. Michael A. Crew & Paul R. Kleindorfer, 2006. "The Welfare Effects of Entry and Strategies for Maintaining the USO in the Postal Sector," Topics in Regulatory Economics and Policy, in: Michael A. Crew & Paul R. Kleindorfer (ed.), Progress toward Liberalization of the Postal and Delivery Sector, chapter 0, pages 3-22, Springer.
    11. 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.
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    Citations

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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. Francis Bloch & Axel Gautier, 2017. "Strategic bypass deterrence," Journal of Regulatory Economics, Springer, vol. 52(2), pages 189-210, October.
    3. DAM, Kaniska & GAUTIER, Axel & MITRA, Manipushpak, 2007. "Efficient access pricing and endogenous market structure," LIDAM Discussion Papers CORE 2007004, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. 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.
    5. Kevin M. Currier, 2012. "Optimal pricing of postal services under endogenously determined entry," Economics Bulletin, AccessEcon, vol. 32(4), pages 3503-3511.

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    More about this item

    Keywords

    Postal economics; worksharing; access pricing;
    All these keywords.

    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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