Helmuth Cremer, Philippe De Donder, and Frank Rodriguez, “The implications of liberalising the postal sector on welfare and pricing”, IDEI Working Paper, n. 846, February 2015.
This note synthesises several research papers that IDEI has produced together with Royal Mail economists and others since 2000 and summarises their findings on the welfare and pricing implications of opening the postal market to competition, when the national postal operator operates under different regulatory requirements (e.g. price constraints or universal service obligations) and according to the competition regime (such as access only, bypass only, access and bypass) which emerges in the market following its liberalisation.4 The understanding of the postal sector and of likely effects of different types of regulation requires taking appropriate account of the specific nature of this industry. We then start this note (section 2) by mentioning the most important characteristics of the sector, which renders it different from other network industries such as telecoms or energy. We then summarise in section 3 the research papers. All papers share the same form: they start with a specific research question, build a formal model incorporating the relevant characteristics of the postal sector given this research question, and then provide numerical results based on a calibration of this model to a generic European postal market. The calibration assumptions are not from a particular postal operator, but are reflective, in our view, of the general nature of postal markets and cost structures found in published empirical studies. The same calibration assumptions are used in all papers, except when assumptions are updated to reflect the results of newly available empirical studies. In most of the papers we have checked the robustness of our results through sensitivity testing of key calibration values. However, we should stress that these results are indicative and in any particular country, for example the UK, a more detailed empirical exercise would be necessary to model prospective effects directly. Section 4 concludes with a brief summary of the main results surveyed here.
postal; regulation; welfare; pricing;