A Game-Theoretic Model of the Market for International Mail

Edward S. Pearsall ()
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A chapter in The Future of the Postal Sector in a Digital World, 2016, pp 295-312 from Springer

Abstract: Abstract The terminal dues system, the system of rates that postal operators (POs) set for the delivery of each other’s international mail, is the fundamental feature that must be explained by any model of the market for international mail. In this chapter, I apply elements of game theory to show how the terminal dues system is structured to maximize the combined profits on international mail of the participating POs. This leads to a system of rates that are set at marginal cost when there are no entrant/competitors (ECs), and at or above marginal cost for those POs that face ECs.

Keywords: Nash Equilibrium; Marginal Cost; Mixed Strategy; Cooperative Game; Price Discrimination (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:spr:topchp:978-3-319-24454-9_20

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DOI: 10.1007/978-3-319-24454-9_20

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