Pricing by state-owned enterprises: the case of postal services
Version of Record online: 7 OCT 2008
Copyright © 2008 John Wiley & Sons, Ltd.
Managerial and Decision Economics
Volume 29, Issue 7, pages 575–591, October 2008
How to Cite
Geddes, R. R. (2008), Pricing by state-owned enterprises: the case of postal services. Manage. Decis. Econ., 29: 575–591. doi: 10.1002/mde.1420
- Issue online: 7 OCT 2008
- Version of Record online: 7 OCT 2008
Sappington and Sidak develop a model of state-owned enterprise (SOE) pricing behavior in which firms maximize a weighted average of revenues and profits. The model predicts that SOEs will lower prices in more-elastic markets and raise them in less-elastic markets if the weight they place on profit is positive. The Postal Reorganization Act of 1970 relaxed the institutional constraints on pricing by the US Postal Service, which allows a test of the Sappington–Sidak model. The model's predictions are broadly confirmed. Congress passed the Postal Accountability and Enhancement Act in 2006, which may help address some anticompetitive concerns in this industry. Copyright © 2008 John Wiley & Sons, Ltd.