✦ LIBER ✦

Pricing by state-owned enterprises: the case of postal services

✍ Scribed by R. Richard Geddes

Publisher: John Wiley and Sons
Year: 2008
Tongue: English
Weight: 216 KB
Volume: 29
Category: Article
ISSN: 0143-6570
DOI: 10.1002/mde.1420

No coin nor oath required. For personal study only.

✦ Synopsis

Abstract

Sappington and Sidak develop a model of state‐owned enterprise (SOE) pricing behavior in which firms maximize a weighted average of revenues and profits. The model predicts that SOEs will lower prices in more‐elastic markets and raise them in less‐elastic markets if the weight they place on profit is positive. The Postal Reorganization Act of 1970 relaxed the institutional constraints on pricing by the US Postal Service, which allows a test of the Sappington–Sidak model. The model's predictions are broadly confirmed. Congress passed the Postal Accountability and Enhancement Act in 2006, which may help address some anticompetitive concerns in this industry. Copyright © 2008 John Wiley & Sons, Ltd.

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