Progress in the Competitive Agenda in the Postal and Delivery Sector
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Progress in the Competitive Agenda in the Postal and Delivery Sector

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.
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Chapter 1: Service Quality, Price Caps and the USO Under Entry

Michael A. Crew and Paul R. Kleindorfer


Michael A. Crew and Paul R. Kleindorfer* INTRODUCTION 1 The problem of quality of service in regulated industries has been the subject of an extensive and developing literature as surveyed by Sappington (2005). Service quality has also been an issue for postal operators (POs) under monopoly, with increasing attention paid in recent years to its measurement. It will become even more important under competitive entry, as it contributes to both the definition and cost of the Universal Service Obligation (USO) as well as to product and marketing strategies for business products that will be the focus of competition. Indeed, with full market opening (FMO) approved to take effect in the European Union (EU) in 2011 and 2013, service quality along with maintaining the USO will take on new dimensions. For example, the quality of competitive products may be affected by the quality levels determined by regulators for USO products. Similarly, the technological innovations spurred by the Internet will impact service quality and its regulation. The topic is complicated and too broad to be covered in one chapter. The focus of this chapter will be on integrating price-cap regulation with service quality in the postal sector under entry. While service quality under entry has an extensive literature for regulated industries, it is relatively new ground in the postal sector, because, until only recently, entry was not a major issue. With 2011 looming in Europe and postal reform taking root around the world, this is changing fast and quality...

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