Price Controls in the Postal Sector: A Welfare Analysis of Alternative Control Structures

Postal regulators set price controls in order to simultaneously ensure the provision of the universal service, promote competition and equity. We study the associated price control procedures in a model where the universal service provider offers both a single piece product and a business mail product and where entrants offer a bulk mail product. Our results from the numerical calibration of our model indicate that in the case where entry is confined only to access, a range of procedures appear capable of meeting these objectives. However, if bypass is available these trade offs become more costly.