Access Pricing, Bypass and Universal Service in Post

Abstract

A postal regulator typically faces two issues which make the design of efficient access pricing especially difficult and which complicate the process of liberalizing the industry. First, universal service obligations, together with the presence of fixed costs, require retail prices to depart from the underlying marginal costs of the incumbent provider. Second, competing firms may be able to bypass the incumbent's delivery network. Within a simple and stylized framework, this note analyzes how access charges should best be set in the light of these twin constraints.