The Effect of Entry Regulation on Process Innovation in the Swiss Mail Industry

Abstract

Summary We develop an industry specific model of price competition with product differentiation to analyze the effect of entry regulation on process innovation in the Swiss mail industry. We consider the four most prominent scenarios: Regulated monopoly, end-to-end competition, worksharing without bypass, and work-sharing with bypass. Based on model calibration with data from the Swiss letter market, we find that the incentives to invest in process innovations decrease with deregulation. However, even accounting for this fact, the efficiency gains of a partial liberalization, i.e. worksharing, ensure an increase in social welfare.

Developing Universal Postal Services in Latin America An Economic Perspective

“…On the other side, competition might spur efficiency and innovation in the sector. For the effects of regulation on innovation see Dietl et al (2007Dietl et al ( , 2008aDietl et al ( , 2008b).…”