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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Friebel, Guido / Mendola, Mariapia / Requate, Till / Tsui, Kevin / Wichardt, Philipp / Zulehner, Christine

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Franchise Bidding for Postal Services in Rural Regions

Jörg Borrmann1

1University of Vienna,

Citation Information: Topics in Economic Analysis & Policy. Volume 4, Issue 1, ISSN (Online) 1538-0653, DOI: 10.2202/1538-0653.1178, April 2004

Publication History

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In this paper, we develop a franchise bidding mechanism for postal services under the Universal Service Obligation (USO) in rural areas. For the collection and delivery of mail on rural routes and for small town counter operations, monopoly franchises are awarded. Deficits caused by the USO are balanced by transfers between the government and the incumbent postal operator, i.e. the franchiser. We analyze the efficiency properties of the mechanism and discuss the drawbacks when extending the mechanism to urban areas.

Keywords: Franchise Bidding; Network Industry; Postal Services; Universal Service Obligation

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