- Advances in Regulatory Economics series
Edited by Michael A. Crew and Paul R. Kleindorfer
10. Pricing in competitive two-sided mail markets* Christian Jaag and Urs Trinkner 1. INTRODUCTION Postal letters are a means of communication between two parties with at least one of them having a positive willingness to pay. Postal operators oﬀer a service that exploits this willingness to pay. Interestingly, virtually all postal operators apply a pre-paid mechanism that goes back on Rowland Hill’s proposal of charging only the sender-side of the market instead of the receivers too. This involves the potential for senders to bill the postage onward to the receivers, which varies between the various classes of mail and is essentially determined by the bargaining position between the two communicating parties. Postage for advertising mail remains on the sender side, while postage in commercial relationships is usually – directly or indirectly – passed on to the receivers. For example, Swiss banks increasingly bill postage for bank statements directly to their clients (i.e., the receivers).1 The fact that mail consists of two parties communicating with each other over a choice of platforms (postal operators) makes the postal market potentially two-sided. If this two-sided market is served by only one operator (the current situation in most countries), the designated postal operator has the necessary bargaining power to choose the pricing mechanism of its choice (sender pays, receiver pays, or a mix between the two). In a second step, senders and receivers are able to reallocate postage by various means, such as billing surcharges as in the case of bank statements mentioned above....
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