Access Pricing and Entry in the Postal Sector

CORE Discussion Paper No. 2006/65

28 Pages Posted: 20 Sep 2006

See all articles by Francis Bloch

Francis Bloch

University of Angers - Research Group in Quantitative Saving (GREQAM); National Center for Scientific Research (CNRS)

Axel Gautier

University of Liège - Research Center on Public and Population Economics; Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Date Written: July 2006

Abstract

Postal markets have been open to competition for a long time. But, with a few exceptions, the competitors of the incumbent postal operator are active on the upstream segments of the market-preparation, collection, outward sorting and transport of mail products. With the further steps planned 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 models will be possible for the new postal operators: access: where the firm performs the upstream operations and uses the incumbent's delivery network and bypass where the competing firm controls the entire supply chain and delivers mails with its own delivery network. These two options have different impacts on welfare and the profit of the incumbent operator.

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's prices.

Keywords: access, bypass, postal sector

JEL Classification: L51, L87

Suggested Citation

Bloch, Francis and Gautier, Axel, Access Pricing and Entry in the Postal Sector (July 2006). CORE Discussion Paper No. 2006/65, Available at SSRN: https://ssrn.com/abstract=931594 or http://dx.doi.org/10.2139/ssrn.931594

Francis Bloch (Contact Author)

University of Angers - Research Group in Quantitative Saving (GREQAM) ( email )

Centre de la Vieille Charité
2, rue de la Charité
Marseille, 13002
France

National Center for Scientific Research (CNRS) ( email )

54, boulevard Raspail
Paris, 75006
France

Axel Gautier

University of Liège - Research Center on Public and Population Economics ( email )

Boulevard du Rectorat, 7, Batiment 31
Sart-Tilman
B-4000 Liege, 4000
Belgium

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium
+32-10-47.43.01 (Fax)

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