Discussion Papers

Werner Neu, Walpurga Speckbacher, Ulrich Stumpf

Preisregulierung im Monopolbereich des Postdienstes
Nr. 92 / August 1992
(no longer available)


A large part of DBP Postdienst's letter services are provided on a reserved basis. In this situation, the task of price regulation through the Federal Minister of Post and Telekommunications is to protect customers against unjustified tariff increases that DBP Postdienst might otherwise be able to impose due to its market position. At the same time, price regulation should offer incentives to the regulated enterprise to provide high quality as well as innovative services, assure the financial equilibrium of the enterprise, and allow the enterprise the largest possible degree of flexibility in its operations.

The authors have studied two alternative approaches to price regulation: cost-of-service regulation and price cap regulation. They come to the conclusion that on the basis of the available evidence price cap regulation is the approach offering on balance the greatest likelihood that it will achieve the above mentioned goals. They find that price cap regulation avoids the negative incentive effects inherent in cost-of-service regulation and that at the same time it provides assurances that the average level of tariffs will decline in real terms. Furthermore they find that price cap regulation is relatively easy to administer by the regulatory authority. Their recommendations are:

1. Only services in which DBP Postdienst has a statutory monopoly postion are to be regulated by price caps.

2. To avoid undue cross subsidization, three separate baskets of regulated services are to be formed, each to be controlled by its own price cap formula. The services to be so separated are: letter services primarily used by households and small business organizations; inland letter services used exclusively by business organizations; and cross-border letter services, used exclusively by business organizations.

3. Services in all three baskets are to be submitted to price cap formulae that are specified identically. With respect to the tariffs of the services in the first basket (values of stamps), account has to be taken of the fact that these may only change in steps of five or ten Pfennige, which may preclude increases at regular yearly intervals. It must be assured that increases forgone this way in a particular year may be used at a later time.

4. As index representing the general inflation, WIK proposes a synthetic index made up of indices reflecting the price changes of the inputs that DBP Postdienst uses. For the productivity factor X, it finds a value of one to two percent as realistic.

5. The so specified price cap formula is to be in force for a period of four years.

We recommend that price cap regulation be instituted at the time at which DBP Postdienst proposes to implement its new letter services concept.

Only German language version available.

Discussion Paper is no longer available.

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