Innovation in the Swiss mail sector: deregulation versus liberalization

Article type: Research Article

Authors: Jaag, Christian

Affiliations: University of St Gallen, IFF, Varnbüelstrasse 19, CH-9000 St Gallen, Switzerland; Swiss Post, Viktoriastrasse 21, CH-3030 Berne, Switzerland. E-mail: [email protected]

Note: [] The views expressed in this paper are those of the author and do not necessarily reflect the opinion of the institutions he is affiliated with

Abstract: In this paper we discuss an incumbent postal operator's incentives to invest in an innovation in the face of upcoming liberalization and deregulation of the letter market. Our contribution is a short description of recent innovations in the Swiss mail market and their interpretation in light of an illuminative yet tractable model. Following the literature, we distinguish between product and process innovation. We characterize competitive pressure by a reduction in the incumbent's market share and an increase of his/her perceived price elasticity of demand due to consumers' switching to competitors. This may result in adverse incentives to invest in an innovation. Likewise, deregulation leads to increased entrepreneurial freedom on the operator's side and possibly a lower burden of USO (universal service obligations), reflected in lower cost. This sustains incentives to invest in both product and process innovation.

DOI: 10.3233/IJR-120067

Journal: International Journal of Regulation and Governance, vol. 7, no. 2, pp. 147-155, 2007