Worksharing and Access Discounts in the Postal Sector with Asymmetric Information*

Abstract

This paper analyzes the optimal worksharing and access amounts granted to mailers and entrants in a liberalized postal sector when there is asymmetric information about the Post Office’s (PO) costs. I show that when the regulator is unable to ascertain which part of the total cost of sorting has to be attributed to each sorting facility, the optimal “access discount” given to entrants is set in a pro-competitive way. This facilitates the entry of firms that are less efficient than the PO. However, the optimal “worksharing discount” may prevent the entry of mailers that are more efficient than the PO. Copyright Springer Science+Business Media, Inc. 2006access pricing, worksharing discounts, competition, postal, D43, L51,

Access Pricing in the Postal Sector: Theory and Simulations

“…I first assume that λ = 0 and w j = 1 (corresponding to the case of unweighted welfare maximization without profit constraint), which allows me to concentrate on the first three elements of equations (1) and (2). First observe that marginal cost pricing of access is required if and only 7 if the incumbent's E2E good is also priced at marginal cost (p = c + d I j ). In that case, the access charges in a given region j would be the same for the entrant and for CDA, since the delivery cost is the same in both cases (a E j = a D j = d I j ).…”

“…In that case, the access charges in a given region j would be the same for the entrant and for CDA, since the delivery cost is the same in both cases (a E j = a D j = d I j ). The uniform pricing requirement prevents this situation from occurring as soon as delivery costs 7 I exclude the case where σ IE = σ ID = 0, since it would mean that the demand for the USP E2E service is independent of the price of both access goods. vary across delivery areas (d I U 6 = d I R ).…”

Access Pricing in the Postal Sector

“…I first assume that λ = 0 and w j = 1 (corresponding to the case of unweighted welfare maximization without profit constraint), which allows me to concentrate on the first three elements of equations (1) and (2). First observe that marginal cost pricing of access is required if and only 7 if the incumbent's E2E good is also priced at marginal cost (p = c + d I j ). In that case, the access charges in a given region j would be the same for the entrant and for CDA, since the delivery cost is the same in both cases (a E j = a D j = d I j ).…”

“…The Ramsey term also becomes more complex. Its denominator is the same as in (6) and (7) and measures the feedback effect between the two access services. The numerator is a weighted sum of inverse elasticities on the two access markets.…”

Access charges under two-tier pricing

“…Research on worksharing discounts and access charges in the postal sector has traditionally ignored the quality of retail and wholesale services. 4 Crew and Kleindorfer (1991); Sherman (2001); Billette de Villemeur et al (2003) and Calzada (2006) identify the optimal worksharing discounts when a group of mailers pre-sort their mail. Billette de Villemeur et al (2004) characterize the optimal access policy when there is one incumbent PO and one entrant delivering single-piece and bulk mail at low and high cost areas, and delivery of single-piece letters is offered by the PO at one uniform price.…”