Comments
Comment by Christian:
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Simple answer: You will benefit from cheaper stamps when there’re two guys serving your street. One is called monopoly and the other competition. How can someone dislike competition? Rip-off wages are more a matter of power to (or not) negotiate them. Blame weak unions and not companies.
Comment by ssp:
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Let me just get this straight: Two people running up and down the same roads, i.e. twice – or almost twice – as much work done for the same result will actually make things cheaper despite the effort to achieve it just became more expensive?
I’d say a properly regulated monopolist should beat that approach without much effort.
And then the unions who don’t play a role in the contracts with the cheapo companies are to blame for their inhuman contracts? I’ll have to assume the poor companies actually wanted to pay great wages but their staff begged them to be exploited…
Comment by Christian:
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Well, that’s why you can buy one product a million times on earth in dozens of different locations. Postal services are as much a product as others. Wouldn’t you prefer this over a monopoly when buying your groceries? Just imaging how many jam jars are driven down the street every day where only one truck would be enough!?
And why shouldn’t unions play a role in contract negotiations? I doubt that the postal business in Germany has no union wages (if not they better do so). At least the “Betriebsrat” will play a role. And btw it is the most important goal of a company to not dissipate ressources (like wages) - it’s the goal of wage negotiations by workers (or their representatives) to offset this. If they can’t it’s their fault. But that’s only economics chitchat…
Comment by ssp:
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I don’t think that Postal Services are just like supermarkets. Just like roads or railways they are part of a country’s infrastructure. They are somewhat regulated and get support for also covering non-profitable areas. You wouldn’t want to leave the Postal Services to the free market as you could just end up without a working service.
A certain amount of choice can be a benefit in supermarkets, just as it makes sense to have different supermarkets if only because it’d be impossible to make millions of people drive to the same one and shop there. So there are real benefits from having different supermarkets while they don’t lose too much of their efficiency. Compare that to Postal Services: Having two or three of them covering the same area is bound to almost halve their efficiency. And thus it seems that the only way those newly companies see a way to make money is by exploiting their employees with bad wages. I still fail to see a benefit of that.
And it appears that these new companies are hostile to having unions in their companies. Which makes perfect (business) sense if the whole point of their company is to pay sub-standard wages.
Comment by Christian:
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I don’t know what to say anymore. I started to divide the world into people who know about economics and people who don’t (Don’t take it as an offense. I just stumbled upon your post and thought I need to comment.). Then I tell myself, ok, if they don’t really know about economics then how can they argue about economical mechanisms. For example, I know nothing about complex numbers so I keep myself out of the discussion (if there is one) about complex numbers. The same here. It’s a (very human) expression you have in your reasoning, but that’s about it. You see a evil rational behing “cheapos” which is nothing but ideology. Maybe ideology is not the best word but that’s a field of study where I have no expertise, so I’m not able to find the right words and better stop typing…
Comment by ssp:
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I am certainly not an economist. But I don’t think my point here is a number-crunching one. In the case of these Postal Services it’s unclear (as in unproven, has someone actually computed this?) to me what effect additional companies in this business will have. Are there any studies on this? Preferably neutral ones? I haven’t crunched the numbers but it would seem extremely tricky to me to make postal services more efficient by throwing almost twice the staff at it (and increase the administrative overhead).
But the main point seems to be whether or not we want people to work at very low wages for the profits of some corporation. At least in our own, rich, country we can decide about this. And there are all other sorts of ‘inconveniences’ to businesses like taxes or ecological standards which are bad for their profits but considered worth having.
And seeing that the spontaneous reaction of the cheapo Postal Services is to lay off staff if just the idea of a minimum wage for their staff is discussed, suggests that their entire business is based on paying people poorly rather than being more efficiently organised or offering better service. Effectively they are removing themselves from the business with that, so they don’t seem to be good enough at doing it.
[And no, I don’t think that comparisons to complex numbers are of any help here. Business or economical theories/ideologies seem to be subject to trends and people using them seem to imply many things which depend on the person you are listening to as well as the time at which the person made the statement. A simple definition like complex numbers with all the facts it implies doesn’t depend on current trends, nor the ideas of the person presenting it.]
Comment by Christian:
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I recommend the following:
Book Reviews: “Competition and Innovation in Postal Services”, Michael A. Crew; Paul R. Kleindorfer, Review author[s]: Gena F. Hampton, Southern Economic Journal, Vol. 59, No. 1. (Jul., 1992), pp. 122-124.
A brief and hastily copy-and-pasted bibliography:
Armstrong M. (2002). The theory of access pricing and interconnection. In: Cave M.et al. (eds) Handbook of telecommunication Vol 1. North-Holland, Amsterdam, pp. 295–386 Billette de Villemeur, E., Cremer, H., Roy, B., & Toledano, J. (2002). Pricing and worksharing discounts in the postal sector. In M. A. Crew, & P. R. Kleindorfer (Eds.), Postal and delivery services: Delivering on competition (pp. 33–48). Boston: Kluwer Academic Publishers. Billette de Villemeur E., Cremer H., Roy B., Toledano J. (2003a). Optimal pricing and global price-cap in the postal sector. Journal of Regulatory Economics 24, 49–62
Billette de Villemeur, E., Cremer, H., Roy, B., & Toledano, J. (2003b). Pricing and imperfect competition in the postal sector. mimeo, IDEI, University of Toulouse. Billette de Villemeur E., Cremer H., Roy B., Toledano J. (2004). Access and (non-)uniform pricing in the postal sector. In: Crew M.A., Kleindorfer P.R.(eds) Competitive transformation of the postal and delivery sector. Boston, Kluwer Academic Publishers, pp 43–68 Billette de Villemeur, E., Cremer, H., Roy, B., & Toledano, J. (2005). Worksharing, pricing and competition in the postal sector. In M. A. Crew, & P. R. Kleindorfer (Eds.), Regulatory and economic challenges in the postal and delivery sector (pp. 139–162). Boston: Kluwer Academic Publishers.
Cremer, H., M. De Rycke and A. Grimaud (1995), “Alternative scenarios for the reform of postal services: optimal pricing and welfare”, in Commercialization of Postal and Delivery Services, edited by M. A. Crew and P. R. Kleindorfer, Boston: Kluwer Academic Publishers, 247—267.
Cremer, H., M. De Rycke and A. Grimaud (1997), “Costs and benefits of universal service obligations in the postal sector” in Managing Change in the Postal and Delivery Industries,edited by M. A. Crew and P. R. Kleindorfer, Boston : Kluwer Academic Publishers, 22—41.
Cremer, H., A. Grimaud and J.-J. Laffont (2000), “The cost of universal service in the postal sector” in Current Directions in Postal Reform, edited by M. A. Crew and P. R. Kleindorfer, Boston : Kluwer Academic Publishers, 47—68.
Cremer, H., J.P. Florens, A. Grimaud, S. Marcy, B. Roy. and J. Toledano. (2001), “Entry and competition in the postal market : foundations for the construction of entry scenarios”, Journal of Regulatory Economics, 19, 107-121.
Crew, M., & Kleindorfer, P. (1995). Pricing in postal service under competitive entry. In M. A. Crew, & P. R. Kleindorfer (Eds.), Commercialization of postal and delivery services (pp. 117–136). Boston: Kluwer Academic Publishers. Crew, M., & Kleindorfer, P. (2006). The welfare effect of entry and strategies for maintaining the USO in the postal sector. In M. A. Crew, & P. R. Kleindorfer (Eds.), Progress toward liberalization of the postal and delivery sector (pp. 3–22). New York: Springer. Laffont J.J., Tirole J. (1996). Creating competition through interconnection: Theory and practice. Journal of Regulatory Economics 10, 227–256
Laffont J.J., Tirole J. (2000). Competition in telecommunications. Cambridge, MA: MIT Press Mitchell, R. (1999). Postal worksharing: Welfare, technical efficiency, and Pareto optimality. In M. A. Crew, & P. R. Kleindorfer (Eds.), Emerging competition in postal and delivery services. Boston: Kluwer Academic Publishers. Panzar, J. (2002). Reconciling competition, downstream access and universal service in postal markets. In M. A. Crew, & P. R. Kleindorfer (Eds.), Postal and delivery services: Delivering on competition. Boston: Kluwer Academic Publishers. Panzar, J. (2005). Combining liberalization and unbundling policies in postal markets. mimeo. Sherman R. (2001). Optimal worksharing discounts. Journal of Regulatory Economics 19, 81–92
Tirole J. (1988). The theory of industrial organization. Cambridge, MA: MIT Press
Comment by ssp:
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Thanks for the bibliography. I’ll try to look at one of them when I’m next in the library.
Comment by ssp:
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Hm, our library doesn’t seem to have many of those volumes. I only managed to find the Cremer et al 2001 text in the catalogue and with some of the keywords another somewhat related text [Bloch, Gautier (2006) Access pricing and entry in the postal sector].
While they do some computations and the latter even discusses what needs to be done to keep up an USO when new competitors appear, none of them concludes that the postal companies should exploit their workers or gives (at least not in a way that is obvious to me) numbers which suggest that it’s even feasible to establish a second delivery network without increasing the total cost of delivering the same amount of mail.
