Abstract
In De Donder et al (2001), we constructed a theoretical model whose aim was to understand, qualitatively, how the postal market might develop if it were liberalised and the reserved area reduced significantly. The primary justification for the existence of a postal monopoly is the funding of the universal obligation (USO) and, in nearly all countries, this takes the form of the provision of a universal postal service at a uniform (that is, geographically averaged) price. In our model, the incumbent was faced with a USO of this form and just covered its costs (including the fixed cost associated with the universal provision required by the USO as well as making a ‘normal’ rate of return on assets) before the opening of the market to competition. Through the model we studied, in particular, the consequences for the sustainability of the uniform price of fully liberalising postal markets and found that the operation of the market would lead to heavily differentiated prices and the break down of the uniform tariff. However, that paper did not consider explicitly the issue of the funding of the USO itself.
Formerly The Post Office
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References
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De Donder, P., Cremer, H., Rodriguez, F. (2002). Funding the Universal Service Obligation under Liberalisation. 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_2
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DOI: https://doi.org/10.1007/978-1-4613-0253-7_2
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