Keywords
agent-based modelling, liberalisation of the postal markets, postal sector, Universal Service Obligation (USO), USO provider
Abstract
In network industries, a Universal Service Obligation (USO) is often seen as a burden on an incumbent, which requires compensation for the net cost of such service provision. This paper estimates the effects of consumer loyalty as an intangible benefit of USO in the postal sector. In doing so, the agent-based modelling (ABM) approach is applied, which makes it possible to model the behaviour of boundedly rational consumers and is thus particularly appropriate for taking into account intangibles considerations. The analysis shows that loyalty is crucial to whether the USO uniform pricing constraint results in loss-making or profitability. Under certain conditions and in the presence of a loyalty parameter, uniform pricing gives a USO provider an advantage, when the size of the rural area is sufficiently big and a disadvantage, if its size is too small. This finding is counterintuitive as USO providers in countries with sparsely populated areas are typically expected to incur a significant net cost of USO.
Recommended Citation
Bakhtieva, D., & Kiljański, K. (2012). Universal Service Obligation and Loyalty Effects: An Agent-Based Modelling Approach. Yearbook of Antitrust and Regulatory Studies, 5(7), 125-141. Retrieved from https://press.wz.uw.edu.pl/yars/vol5/iss7/5
First Page
125
Last Page
141
Page Count
16
Publisher
University of Warsaw
Publication Date
2012-11-30
