Microeconomic Impact of Monetary Integration - The Case of Postal

The objective of this paper is to present potential threats and opportunities resulting from monetary integration to postal services rendered by national post operators. National post operators are subject to many regulations and requirements that make the market in which they operate far from perfect competition. National operators are granted a legal monopoly in many business areas. This is associated with many benefits. The EU policy, however, is heading toward sequential liberalization of the postal services market and this will be achieved in coming years. This liberalization will result in national post operators being subject to external competition from other EU member states. They are already competing with some international commercial logistics/courier service companies, but there will be a substantial change in the severity of competition in this market if the national post operators do not create an oligopoly, setting prices or market share. This paper develops a formal theoretical framework to show how an oligopoly in the EMU can efficiently substitute the monopoly on national postal services markets found today. The stylized fact advocated by the authors is that monetary integration facilitates an oligopoly structure rather than other market structures to replace the legal monopoly. Despite the hypothesis that removing the last barriers for economic integration by introducing a common currency facilitates monopolization, the specific features of postal services undermine it. This paper offers an alternative that could apply to other industries subject to similar regulations, especially those that were historically public sectors in the EU that have been undergoing restructuring and privatization. Since this paper is theoretical, there are no data sets, nor is there quantitative analysis. The methods employ consumer and firm choice in a monopoly/oligopoly model with some modifications to reflect EU-specific features and the monetary integration consequences for postal service providers. The result is as follows: Oligopoly structure for postal services market represents the only efficient solution that satisfies boundary conditions at national and regional levels