Is Postal Service a Natural Monopoly?
The title of this paper raises what is perhaps the most pressing empirical question facing policy makers interested in postal reform. For if postal service is a technological natural monopoly, competition should be introduced into the system with extreme caution, if at all. Unfortunately, I have nothing to contribute to the empirical debate. Indeed, I shall argue that it is unlikely that the question will ever be satisfactorily resolved by econometric research. Nevertheless, I am convinced that postal service is a natural monopoly. Yet that “fact” in no way exempts the industry from competitive reform. This apparent paradox is resolved by appealing to the network structure of postal service and to carefully drawn analogies to recent United States experience in telecommunications, another network industry.
KeywordsScale Economy Postal Service Postal Network Natural Monopoly Network Industry
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