Table of Contents

Progress in the Competitive Agenda in the Postal and Delivery Sector

Progress in the Competitive Agenda in the Postal and Delivery Sector

Advances in Regulatory Economics series

Edited by Michael A. Crew and Paul R. Kleindorfer

Regulation continues to be an important issue in the postal and delivery sector of the global economy. This latest volume of the series covers progress made in the competitive agenda in the industry. It is global in scope and addresses topics of great importance to scholars and practitioners of postal regulation and public sector economics.

Chapter 9: Cost Analysis and Pricing of Innovative Postal Products

Louis F. O’Brien, Leon A. Pintsov and Andrei Obrea

Subjects: economics and finance, public sector economics


Louis F. O’Brien, Leon A. Pintsov and Andrei Obrea* Not everything that counts can be counted, and not everything that can be counted, counts. Attributed to Albert Einstein 1 INTRODUCTION Modernization of the postal sector raises a number of questions related to the nature and role of postal products in the mail communication system. In addition to their traditional role, postal products also serve as a main interface between users and postal operators (carriers) as well as a target for regulatory process. In a deregulated environment, pressure to quickly introduce new products with differentiated features is high. Having this in mind, and after reviewing the literature, we concluded that a clear definition of postal products suitable for reliable cost analysis can be very useful. Meanwhile, significant progress was made in specifying data structures suitable for representing information in business applications. In a previous paper we addressed implications of a formal approach to product definition for product innovation (Pintsov and Obrea, 2008b) that has many advantages. The present chapter exploits this approach for cost analysis exemplified by parcel products. While we believe that the approach advocated in this chapter is broadly applicable to all classes of mail (letters, flats, and parcels) and mail products, we had to restrict our analysis to parcel products due to available experimental data.1 For our analysis we selected a single costing methodology due to space limitations. We have chosen activitybased costing (ABC) since this is the methodology that is used in...

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