EU postal market
The Liberalization of the EU Postal Market:
What are the possible welfare effects?
1. Introduction
In regulated industries, governments established Universal Service Providers (USPs) in the postal market in order to provide every inhabitant of a country with essential services. Many
European Union (EU) member states decided that by the 1st of January 2009 the EU postal market should be liberalised, causing competition to increase. When competition rises within a specific market, usually, welfare and total economic surplus increase. This paper examines the possible welfare effects of the liberalisation of the EU postal market while considering a range of markets.
Firstly, the paper considers various points of view concerning the impacts of the Full Market
Opening. Secondly..
2. Impacts of the Full Market Opening
An increase in competition generally stimulates companies to be more innovative, alter their pricing practices and provide high quality services to their customers. Postal operators from various countries have diverse opinions concerning the impacts of the Full Market Opening
(FMO). The Polish postal operator was concerned that the elimination of the monopoly would cause the quality of service to decline and possibly cause delays in delivery whereas the United Kingdom’s Royal Mail believed that an increase in competition would be beneficial for both the company and the consumer. (Postal services liberalisation, 2007)
Under the FMO, Member States are obliged to provide every EU citizen with more reliable and attainable postal services by opening branches in convenient locations. (Postal market: final barriers to total liberalisation to be lifted by 2009, 2006) Due to a rise in competition, firms would no longer be present in an imperfectly competitive market (ICM) but would now be part of a perfectly competitive market (PCM). In a PCM, a company would be able to maximise its profits when the market price is equal to the marginal cost. It is more profitable
What are the possible welfare effects?
1. Introduction
In regulated industries, governments established Universal Service Providers (USPs) in the postal market in order to provide every inhabitant of a country with essential services. Many
European Union (EU) member states decided that by the 1st of January 2009 the EU postal market should be liberalised, causing competition to increase. When competition rises within a specific market, usually, welfare and total economic surplus increase. This paper examines the possible welfare effects of the liberalisation of the EU postal market while considering a range of markets.
Firstly, the paper considers various points of view concerning the impacts of the Full Market
Opening. Secondly..
2. Impacts of the Full Market Opening
An increase in competition generally stimulates companies to be more innovative, alter their pricing practices and provide high quality services to their customers. Postal operators from various countries have diverse opinions concerning the impacts of the Full Market Opening
(FMO). The Polish postal operator was concerned that the elimination of the monopoly would cause the quality of service to decline and possibly cause delays in delivery whereas the United Kingdom’s Royal Mail believed that an increase in competition would be beneficial for both the company and the consumer. (Postal services liberalisation, 2007)
Under the FMO, Member States are obliged to provide every EU citizen with more reliable and attainable postal services by opening branches in convenient locations. (Postal market: final barriers to total liberalisation to be lifted by 2009, 2006) Due to a rise in competition, firms would no longer be present in an imperfectly competitive market (ICM) but would now be part of a perfectly competitive market (PCM). In a PCM, a company would be able to maximise its profits when the market price is equal to the marginal cost. It is more profitable
References: Geradin, D. (2006, September 20). The liberalization of network industries in the European Union: where do we come from and where do we go? 27). EUROPA - European Commission - Homepage. Retrieved November 15, 2009, from http://ec.europa.eu/news/business/061027_1_en.htm Postal services liberalisation. (2007, December 18). EurActiv. Retrieved November 15, 2009, from www.euractiv.com/en/transport/postal-services-liberalisation/article-161377#