Economies of scale and scope and opening hours in post offices and agencies

Abstract

The purpose of this study is to analyze the cost structure of Swiss Post's postal outlets. In particular, the idea is to assess economies of scale and scope in post offices and franchised postal agencies.Information on their optimal size and production structure is of importance from the policy-makers' point of view because this hypothetical situation may be a basis for calculation of reimbursements when providing the universal service. Two important novelties are introduced in this study. First, the latent class model accounts for postal outlets with different underlying production technologies, caused by unobserved factors. Second, the cost model includes standby time as an indicator of public service because regulated accessibility and negotiated opening hours that enhance public service frequently lead to opening hours that exceed the time necessary to operate the demand. Overall, this analysis confirms the existence of increasing unexploited economies of scale and scope with falling outputs in the Swiss Post office network. Furthermore, the results for the latent class model point to the existence of unobserved heterogeneity in the industry.

Are All State-Owned Enterprises Equal? A Taxonomy of Economic Activities to Assess SOE Presence in the Economy

“…Furthermore, the technological characteristics of some transport activities can lead to some degree of market power. For example, the economies of scale and network features of post office activities under universal service obligation imply that efficiency is attained by having one producer (Filippini and Koller 2012;Filippini et al 2010;Bradley et al 2006;Farsi et al 2006;Filippini and Zola 2005;Mizutani and Uranishi 2003;Cazals et al 2002;Gazzei et al 2002;Wada, Tsunoda, and Nemoto 1997;and Norsworthy et al 1991). Similarly, evidence of significant economies of scale has been found for airports, providing a rationale for their operation as local natural monopolies (Fuerst and Gross 2018;Martin and Voltes-Dorta 2010;Main et al 2003;Rendeiro 2002;Tolofari et al 1990).…”

Economies of Scale and Scope in Postal Outlets Under Consideration of Unobserved Heterogeneity

“…There are few empirical studies that have been concerned with economies of scale and scope in the postal market (e.g. Filippini and Zola 2005, Bradley et al 2006, Farsi et al 2006) (delivery or combined activities), Cazals et al 2002, Gazzei et al 2002 and Filippini et al 2010b) (collection)). They found evidence for economies of scale and, partially, scope.…”

“…Moreover, we include standby periods of opening time as explanatory variables in the cost model. This is a relatively new model specification introduced in Filippini et al (2010a, b). This variable will allow us to consider production process situations in which a post office has to remain open even if demand is zero.…”

“…4 4 This data has also been used in Filippini et al (2010a, b) and represents more than 99 percent of all postal outlets in of Swiss Post. …”