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Liberalization of the Swiss Letter Market and the Viability of Universal Service Obligations

abstract We discuss the ongoing liberalization process in the market for addressed letter mail in Switzerland. The core of the paper is an assessment of the liberalization’s impact on the financial viability of various universal service obligations with and without access to the incumbent’s downstream delivery network for customers and competitors. We propose a simple calibrated model of the Swiss letter
market offering theoretical insights into the mechanics of market opening along with quantitative conclusions bearing direct policy relevance. The extent of the entrants’ market coverage and the equilibrium in the resulting price competition are endogenously determined. Our simulations suggest caution in introducing full market opening. For the scenarios considered, the model shows that either the burden of the uso must be reduced (e.g. with respect to the frequency and the coverage of delivery and / or through price differentiation). Alternatively, other means of assuring financial stability of Swiss Post must be sought, be it through external funds or demand stimulation through new producs, possibly in the worksharing domain.
   
type journal paper
   
keywords Liberalization, Mail, Universal Service Obligation
   
language English
kind of paper journal article
date of appearance 1-5-2007
journal Swiss Journal of Economics and Statistics
publisher Lang (Bern)
ISSN 0303-9692
number of issue III-2
page(s) 261-282
review blind review
   
citation Jaag, C. (2007). Liberalization of the Swiss Letter Market and the Viability of Universal Service Obligations. Swiss Journal of Economics and Statistics(III-2), 261-282.