Abstract
Designing appropriate policies to reform the United States Postal Service (USPS) requires an understanding of business models: privately-owned competitive firms, different forms of regulated monopolies, labor-owned and publicly-owned enterprises, and government agencies. The most crucial factors in comparing these institutional forms are identifying the residual claimants and assessing the power of the incentives and the ability they have to promote efficient operation. Cross-subsidy, allocative and internal efficiency, externalities, innovation, and market structure are also important. Adequate reform of USPS requires Congressional acceptance that the government agency model should be replaced by more independent or privatized models adopted in other countries.
The authors thank participants at the Center for Research in Regulated Industries 2014 Advanced Workshop in Regulation and Competition on New Business Models and Conservation Programs, the 33rd Eastern Conference, the 22nd Conference on Postal and Delivery Economics, and The First Henan Symposium of Development and Institutional Economics, School of Economics, Henan University. We particularly thank Preston Finley and James I. Campbell, Jr, for their discussant comments.
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Notes
- 1.
The formal definition of high-powered, residual claimants and other terms will be found in Sect. 3.
- 2.
Sappington and Sidak (2003) argue that under sales revenue maximization this will be case.
- 3.
Labor managed firms are not necessarily inefficient. Law firms and accounting firms are labor-managed firms. Another exception is UPS. Its big difference was that it was owned mostly by management. In addition, it had a highly developed policy of providing opportunities for progression to management by its drivers. So, the power of the incentives was strong. However, problems of coming up with the equivalent of a market valuation for the firm proved to be a difficult problem. As a result in 1999 UPS floated an IPO, so that a value of its stock was established in the stock market.
- 4.
Toime (1991, p. 275). Elmar Toime was Chief Executive of NZ Post.
- 5.
Prior to PAEA USPS provided a hotchpotch of subsidies to other agencies, e.g. covering the military pensions accrued by its employees, as outlined in Congressional Budget Office 2006. PAEA replaced this with the requirement to prefund healthcare of all retirees.
- 6.
PAEA allowed for a reset but USPS declined to do so.
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Crew, M.A., Brennan, T.J. (2015). Business Models: Some Implications for USPS. In: Crew, M., Brennan, T. (eds) Postal and Delivery Innovation in the Digital Economy. Topics in Regulatory Economics and Policy, vol 50. Springer, Cham. https://doi.org/10.1007/978-3-319-12874-0_1
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