Transaction Cost Economics of Postage Payment and Mailer-Post Interface

Abstract

In 1840, the first prepayment system for letters was established in England with a uniform rate of one penny for all domestic letters of a certain weight regardless of the distance involved. The world’s first postage stamp, the “Penny Black” was introduced as a proof of payment. This was the beginning of the universal service and the uniform rate system. Further development of postal communications systems required new approaches to payment. In 1920, Arthur Pitney developed and began production of the first postage meters that considerably improved operational aspects of prepayment system. Due to several limitations of the metering system, it was difficult to adapt it for high volume and high performance mail generation systems. This provided the initial impetus for development of various permit (postage paid impressions) systems. It is important to note that all these developments since 1840 preserved the basic principle of prepayment.

... postal administrations must provide accounting and invoicing systems which reflect normal commercial practice.

Colin J. Mitchell

President, European Mail & Express Users Association

The authors are grateful to Professors Michael Crew and Paul Kleindorfer for a number of valuable observations and comments.