The Efficiency Costs of the Postal Monopoly: The Case of Third-Class Mail

Thomas M Lenard

Journal of Regulatory Economics, 1994, vol. 6, issue 4, 32 pages

Abstract: This paper provides an estimate of the efficiency costs of the letter monopoly for third-class bulk advertising, the Postal Service's second largest category of mail. Using market data from private mail carriers, excess costs to mailers in 1992 are estimated to be about $2.5 billion, almost one-third of the Postal Service's third-class mail revenues. These costs are the sum of (1) the allocative efficiency loss due to reduced output ($237 million); (2) the increased production costs due to non-cost-minimizing behavior ($712 million); and (3) transfers to postal labor ($1.511 billion). Total efficiency costs--the sum of (1) and (2)--are estimated to be about $950 million. Copyright 1994 by Kluwer Academic Publishers

Date: 1994
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