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

R. Richard Geddes
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R. Richard Geddes: Policy Analysis and Management, Cornell University, Ithaca, NY, USA, Postal: Policy Analysis and Management, Cornell University, Ithaca, NY, USA

Managerial and Decision Economics, 2008, vol. 29, issue 7, pages 575-591

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.

Date: 2008
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