Abstract
In investment theory, investments that can be reversed without penalty are referred to as putty-putty, while those with costs that are completely sunk are referred to as putty-clay. As we will note below, the universal service obligation (USO) may be a case of political economic irreversibility that, if ineptly managed, may lead to a complete unraveling of the viability of the affected sector. Our primary interest is the USO in the postal sector, but the default service obligation is also very much a part of other network industries, and we explore the issue in a more general framework, which provides insights for the deregulation of network industries more generally. Although deregulation is a relatively recent innovation it already has had profound effects on network industries. While its impact on the postal sector has been even more recent and its full effect has yet to be felt, this should be seen as an opportunity for the postal sector to learn from some of the lessons of the other industries. An understanding of the basis for and effects of deregulation generally is beneficial in determining the implications for the USO.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
Similar content being viewed by others
References
Chao, Hung-Po, and Stephen C. Peck. 1996. “A Market Mechanism for Electric Power Transmission.” Journal of Regulatory Economics 10 (1): 25–59.
Cohen, Robert H., William W. Ferguson, John D. Waller, and Spyros S. Xenakis. 2000. “Universal Service without a Monopoly.” In Current Directions in Postal Reform, edited by Michael A. Crew and Paul R. Kleindorfer. Boston, MA: Kluwer Academic Publishers.
Crew, Michael A., and Paul R. Kleindorfer. 1986. The Economics of Public Utility Regulation. Cambridge, MA: MIT Press.
Crew, Michael A., and Paul R. Kleindorfer. 1998. “Efficient Entry, Monopoly, and the Universal Service Obligation in Postal Service.” Journal of Regulatory Economics 14 (2): 103–125.
Crew, Michael A., and Paul R. Kleindorfer. 2000. “Liberalization and the Universal Service Obligation in Postal Service.” In Current Directions in Postal Reform, edited by Michael A. Crew and Paul R. Kleindorfer. Boston, MA: Kluwer Academic Publishers.
Crew, Michael A., and Paul R. Kleindorfer. 2001. “Whither the USO under Competitive entry: A Microstructure Approach.” In Future Directions in Postal Reform,edited by Michael A. Crew and Paul R. Kleindorfer. Boston, MA: Kluwer Academic Publishers.
De Donder, Philippe, Helmuth Cremer, Jean-Pierre Florens, André Grimaud, and Frank Rodriguez. 2001. “Uniform Pricing and Postal Market Liberalization.” In Future Directions in Postal Reform, edited by Michael A. Crew and Paul R. Kleindorfer. Boston, MA: Kluwer Academic Publishers.
Goldberg, Victor P. 1976. “Regulation and Administered Contracts.” The Bell Journal of Economics 7–2 (Autumn): 426–48.
Grace, Martin, Robert Klein and Paul R. Kleindorfer. 2000. “The Demand for Catastrophe Insurance,” Working Paper, Wharton Center for Risk Management and Decision Processes, University of Pennsylvania, December.
Hogan, William W. 1992. “Contract Networks for Electric Power Transmission.” Journal of Regulatory Economics 4 (3): 211–242.
Posner, Richard A. 1969. “Natural Monopoly and its Regulation.” Stanford Law Review 21 (February): 548–643
Posner, Richard A. 1974. ‘Theories of Economic Regulation.“ Bell Journal of Economics 5 (Autumn): 335–58.
Ros, Agustin J., and Karl McDermott. 2000. “Are Residential Local Exchange Services Too Low.” In Expanding Competition in Regulated Industries,edited by Michael A. Crew. Boston, MA: Kluwer Academic Publishers
Sherman, Roger, and Anthony George. 1979. “Second-best Pricing for the U. S. Postal Service,” Southern Economic Journal 45: 685–95.
Tullock, Gordon. 1967. “The Welfare Costs of Tariffs, Monopolies and Theft.” Western Economic Journal 5 (June): 224–32.
Ware, Roger, and Ralph A. Winter. 1986. “Public Pricing under Imperfect Competition.” International Journal of Industrial Organization 4: 87–97.
Worrall, John D. 2001. “Private Passenger Insurance in New Jersey: a Three Decade Advert for Reform.” AEI-Brookings Conference on Insurance Regulation, January 18, 2001, Washington, D.C.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2002 Kluwer Academic Publishers
About this chapter
Cite this chapter
Crew, M.A., Kleindorfer, P.R. (2002). Putty-Putty, Putty-Clay or Humpty-Dumpty?. In: Crew, M.A., Kleindorfer, P.R. (eds) Postal and Delivery Services. Topics in Regulatory Economics and Policy Series, vol 41. Springer, Boston, MA. https://doi.org/10.1007/978-1-4613-0253-7_1
Download citation
DOI: https://doi.org/10.1007/978-1-4613-0253-7_1
Publisher Name: Springer, Boston, MA
Print ISBN: 978-1-4613-7962-1
Online ISBN: 978-1-4613-0253-7
eBook Packages: Springer Book Archive