We present quantitative evidence for substantial economies of scope between letters and parcels in rural areas. The presence of economies of scope indicates that it is cost-efficient to distribute letters and parcels with the same carrier rather than having two independent delivery organizations for them separately. In the context of USO net costs calculations and operational business decisions with shrinking letter volumes and growing parcel volumes, it is important to accurately account for such economies of scope. More explicitly, considering economies of scope will likely decrease estimated USO net costs and, depending on volume conditions, USO constraints and regional characteristics, render the joint delivery of letters and parcels more attractive.

Authors: Ramon Gmür, Felix Gottschalk, Matthias Hafner, Urs Trinkner

To the working paper on ResearchGate

The Digital Markets Act (DMA) has introduced a plethora of new obligations for large digital platforms-so-called "gatekeepers"-in the European Union. While the DMA is not directly applicable in Switzerland, this paper reviews the Terms and Conditions of selected gatekeepers to assess whether and to what extent they nevertheless comply with DMA provisions also regarding Switzerland. Its findings contribute to the discourse not only on the Brussels Effect but also on how Switzerland should react to the DMA.

Authors: Peter Georg Picht, Luka Nenadic, Octavia Barnes, Nicolas Eschenbaum, Yannick Kuster

To the article

US state-level banking deregulation during the 1980s facilitated the sectoral reallocation of labor after the China trade shock. Early-deregulated states were financially more integrated by the 1990s, allowing households to better smooth consumption by borrowing. This stabilized demand, kept the housing prices up, and thus facilitated sectoral reallocation of labor from import-exposed manufacturing sectors toward housing sector.

Authors: Lilia Habibulina, Mathias Hoffmann (Universität Zürich)

To the publication

We utilize standard economic models in which competing firms interact strategically to analyse the evolution of parcel markets after market liberalisation. Our starting point is a parcel market with an incumbent postal operator with a universal service obligation that faces market entry. The incumbent has various options for dealing with the threat of market entry or with market entry that has taken place. Depending on the entry cost, strategic interaction is better understood as quantity competition à la Cournot or price competition à la Bertrand.

In sparsely populated rural areas, fixed cost is high and capacity commitment is possible. Therefore, competition takes place in quantities, which are strategic substitutes, and the incumbent postal operator can in principle deter market entry. However, a vertically integrated firm with guaranteed high quantities (e.g., Amazon) or an established distribution infrastructure (e.g., a retailer) may still enter the market. In both cases, the universal service obligation induces the incumbent to overinvest in capacity and become a top dog, which is an optimal strategy.

In densely populated cities, in contrast, fixed cost is low and capacity commitment not credible. Firms therefore compete in prices, which are strategic complements. The universal service obligation prevents the incumbent postal operator to aggressively set low prices, and consequently, prevents it from detering entry. That is, the incumbent needs to accommodate the entrant. Since the universal service obligation already mitigates price competition it is ambiguous whether the incumbent postal operator invests to become a pacifistic fat cat.

Authors: Funk Michael, Gottschalk Felix, Zuberbühler Eva

Chapter in Service Challenges, Business Opportunities, and Regulatory Responses in the Postal Sector (2024). Parcu P., Brennan T., Glass V. (eds). Springer, Cham.

Presentation (31st Conference on Postal and Delivery Economics 2023)

This paper examines the economic and security implications of Proof-of-Stake (POS) designs, providing a survey of POS design choices and their underlying economic principles in prominent POS-blockchains. The paper argues that POS-blockchains are essentially platforms that connect three groups of agents: users, validators, and investors. To meet the needs of these groups, blockchains must balance trade-offs between security, user adoption, and investment into the protocol.

The authors focus on the security aspect and identify two different strategies: increasing the quality of validators (static security) vs. increasing the quantity of stakes (dynamic security). They find, that the optimal staking design hinges upon a platform's specific objectives and its developmental stage. This research compels blockchain developers to meticulously assess the trade-offs outlined in this paper when developing their staking designs.

You can access the whole conference proceedings here.

Authors: Nicolas Oderbolz, Matthias Hafner, Beatrix Marosvölgyi

The net costs are the difference in profits of a universal service provider with and without its universal service obligation and correspond to the required compensation in a competitive market. We show that such a compensation does not limit the incentives of the universal service provider for cost efficiency and growth.

Authors: Gottschalk Felix, Trinkner Urs, Zuberbühler Eva

To the book chapter

Diversion ratios indicate the fraction of demand that is “diverted” to another company. By analogy, we define retention ratios as the fraction of demand of a particular store or product that is “retained” within a company. In case of a post office closure, retention ratios express how much of the sales in the closed post offices are retained in the remaining post offices. Both retention ratios and diversion ratios are, although defined differently, closely linked to elasticity of demand relative to changes in prices and/or quality. Despite its considerable importance, there is a lack of research on diversion and retention ratios in the postal sector. In our paper, we contribute to the literature in three ways. We provide a review of the relevant literature on diversion and retention ratios for post office and retail networks as well as in merger cases. We identify existing estimates and relevant factors that drive the results. We then qualitatively limit possible ranges of retention ratios of post office closures. We validate our results by comparing empirical volume effects in Swiss Post’s restructured retail network between 2013 and 2019.

Authors: Matthias Hafner, Lory Iunius, Urs Trinkner

Zum Buchbeitrag

The concept of net cost of the universal service obligation (USO) is based on the profit difference of the universal service provider (USP) with and without the USO. In recent times, USPs have been challenged with sharp declines of letter mail and transactions in post offices. As a result, net cost calculations may need to be adapted more regularly. Besides, USP undergo changes in regulation within and outside the scope of the USO, affecting the net cost of the USO. Based on Swiss data, we calulate the net costs of different USO dimensions and compare them with each other.

Autors: Gottschalk Felix, Hafner Matthias, Trinkner Urs

To the book chapter

The article presents a graphical framework based on Subrahmanyam and Thomadakis (1980) that allows to study the impact from firm and market characteristics on systematic risk associated with the return on capital, i.e. Beta risk, for utilities under price control. Within this framework, Beta risk is driven by the magnitude of profit fluctuations following demand shocks.

The framework is then applied to airport firm characteristics and airport market environment features. I find that the frequency of price control resets, the level of operating leverage, the extent of capacity constraints, and the degree of market power all have an unambiguous effect on the level of Beta risk. The scope of the regulatory perimeter and the type of traffic mix may also affect Beta risk; however, the magnitude and direction of their impact rely on the specifics of the case.

The article may assist policy makers to formulate economically sound recommendations on how the regulatory rate of return for airport operators should be determined. Specifically, my findings suggest criteria that can be used to choose adequate peer companies of comparable systematic risk.

Incumbent operators providing universal services are increasingly active in competitive markets, which raise the issue of cross-subsidization. We analyze the competitive and welfare properties of the Swiss net cost balancing mechanism (NCB) applied since 2013 in the postal sector, and compare it to the traditional fully distributed cost approach based on activities. We find that NCB resolves the relevant competitive concerns while having superior welfare properties.

Authors: Haller Andreas, Jaag Christian, Trinkner Urs

To the book chapter

We introduce the reader to three stylized scenarios often referred to by practitioners when asked about the share of a cartel overcharge that was passed on from direct to indirect suppliers. We show how sensitive such predictions are with respect to many
of the underlying assumptions. Even slight deviations from standard assumptions may overturn predictions entirely. We conclude that a reliable estimate of the pass-on rate must always be informed by actual evidence – used either to complement theoretical models or as input for evidence-based models.

Autors: Urs Trinkner, Martin Lutzenberger

Das Bundesgericht hat die Anwendung des Kartellverbots zuletzt deutlich verschärft: Preis-, Mengen und Gebietsabsprachen sind  unabhängig von deren Wettbewerbswirkung de facto verboten. Schon früher hat das Bundesgericht das Wettbewerbsrecht mit ähnlich weitreichenden Entscheiden geprägt. Heute können Fusionen kaum noch untersagt werden, und unangemessene Preise werden nicht mehr sanktioniert. Die bundesgerichtliche Rechtsprechung gefährdet die Kohärenz des Kartellgesetzes: Während im Bereich der Fusionen und unangemessener Preise ein «Laissez-faire»-Ansatz praktiziert wird, wird bei den Abreden eine äusserst interventionistische Politik verfolgt. Den Unternehmen werden dadurch starke Anreize gesetzt, das harte Kartellverbot durch Fusionen zu umgehen.

The «more economic approach» was introduced to antitrust to achieve a more effect-based and theoretically grounded enforcement. However, related to predatory pricing it resulted in systematic over- and under-enforcement: Economic theory does not require dominance for predation to be a rational (and harmful) strategy, although an ex ante dominant firm would often refrain from predation. Hence, within the current legal framework which requires dominance for antitrust to apply, a more effect-based and theoretically grounded antitrust enforcement cannot pursue harmful predation. Therefore, we suggest separating predatory pricing from exclusionary abuse of a dominant firm, both legally and analytically. Instead, predatory pricing should be analyzed along the same logic as a merger. In particular, we argue that three elements from merger control should be adopted: in the absence of dominance, market share and/or turnover thresholds may serve as a de minimis rule; recoupment should be analyzed similar to the competitive effect of a merger between the predator and its prey; and a stronger efficiency defense should be established.

Authors: Michael Funk, Christian Jaag

To the published article
To the working paper

This paper proposes a method to detect bid rigging by applying mutually reinforcing screens to a road construction procurement dataset from Switzerland in which no prior information about collusion was available. The screening method is particularly suited to address the problem of partial collusion, that is, collusion that does not involve all firms and/or all contracts in a specific dataset, implying that many of the classical markers discussed in the corresponding literature will fail to identify bid rigging. In addition to presenting new screens for collusion, it is shown how benchmarks and the combination of different screens may be used to identify subsets of suspicious contracts and firms. The discussed screening method succeeds in isolating a group of suspicious – firms exhibiting the characteristics of a local bid-rigging cartel with cover bids and a – more or less pronounced – bid rotation scheme. Based on these findings, the Swiss Competition Commission (COMCO) opened an investigation and sanctioned the identified suspicious – firms for bid rigging in 2016.

Authors: Imhof David, Karagök Yavuz, Rutz Samuel

To the published article
To the working paper

In einem Artikel in der Finanz und Wirtschaft legt Samuel Rutz dar, dass die 2015 beschlossene Revision des Konsumkreditgesetzes ihre Ziele nicht erreicht hat.

Author: Rutz Samuel

Letter mail services have come under pressure from the emergence of electronic communication channels.

Authors: Geissmann Thomas, Jaag Christian, Maegli Martin, Trinkner Urs

To the publication

Authors: Jaag Christian, Moyano Jose Parra, Trinkner Urs

To the publication

Authors: Eberle Reto, Jaag Christian, Bach Christian

Authors: Robinson Matthew H., Klingenberg J.P., Haller Andreas, Trinkner Urs

To the publication

Authors: Jaag Christian, Maegli Martin

To the publication

This paper discusses the main aspects of the competitive and regulatory state of the postal sector. It presents the different models for postal competition and regulation in the EU and the US and their history, together with their implications on regulation, with a focus on universal services and network access. While postal monopolies used to be the main source of funding for universal service obligations, the need for alternative funding sources after full liberalization has increased the interest of regulators and the public in knowing the cost of these obligations. In parallel, new means of electronic communication and consumer needs call the traditional scope of universal services into question. This paper outlines the economic rationale of current policies and directions for future postal regulation to strengthen the postal services' commercial viability in a competitive age, while safeguarding their relevant characteristics for the economy.

Author: Jaag Christian

To the publication

Rail passenger transport services with integrated regular interval timetables (IRIT) offer passengers a regular interval timetable for services on the railway network. IRIT have the potential to increase the quality and attractiveness of railway passenger services in comparison to other transport modes. This article summarizes the advantages and challenges of an implementation of IRIT for railway passenger services and derives the main requirements for the successful introduction of IRIT.

The comparison of the regulatory framework, the role of IRIT and the development of passenger railway services in CH, the NL and the UK, shows that in those countries, where either IRIT has been introduced (CH) or the high frequency of trains between cities provides for a system comparable to IRIT (NL), railway services play a more important role in the modal split. The successful introduction of IRIT requires a long-run implementation schedule which identifies the necessary investments in the railway infrastructure and points out the financial resources available to make those investments. Furthermore, IRIT requires a high level of punctuality of railway passenger services, the coordination between railway companies when designing the timetable and a priority rule for passenger railway services within IRIT when there are capacity restrictions on the railway network.

Authors: Finger Matthias, Haller Andreas, Strube Martins Sonia, Trinkner Urs

To the publication

Authors: Jaag Christian, Trinkner Urs and Uotila Topias

To the publication

Authors: Haller Andreas, Jaag Christian and Trinkner Urs

To the publication

Authors: Liebrich Andreas, Lutzenberger Martin, Amstad Olivia

This article explores the complementary roles of price regulation and universal service regulation in network industries. It analyzes compensation for the universal service provider (USP) by public finances and a fund to which operators contribute. As long as the USP enjoys market power, price regulation may serve as a means to finance universal services. This implies allowing for price increases to compensate for the net cost of the universal service obligation. It releases competing operators or the general government budget from contributing to its financing but results in distorted pricing and reduced overall welfare due to inefficient entry. The analysis shows that current practices of costing and financing universal services may result in unintended market distortions. The article quantifies these effects and demonstrates how such distortions can be avoided.

Author: Jaag Christian

To the publication

Authors: Maegli Martin, Jaag Christian

To the publication

Authors: Haller Andreas, Jaag Christian, Trinkner Urs

To the publication

Authors: Rohr Charlene, Trinkner Urs, Lawrence Alison, Kim Chong Woo, Potoglou Dimitris, Sheldon Rob

Author: Jaag Christian

The goal of this study is to learn more about tourists» understanding of sustainable tourism. The empirical survey with over 6,000 respondents in eight countries identifies the most relevant aspects of sustainable tourism from a tourists» perspective. Overall the perception is balanced over the different dimensions. Furthermore, five different types regarding tourists» understanding of sustainable tourism are identified in a cluster analysis and a potential market size of sustainable tourism of 22% of all tourists can be identified.

Authors: Wehrli Roger, Egli Hannes, Lutzenberger Martin, Pfister Dieter, Stettler Jürg

To the publication

Authors: Jaag Christian, Dietl Helmut, Trinkner Urs, Fürst Oliver

To the publication

Author: Trinkner Urs

Traditionally, universal services in network industries have relied on granting the universal service provider a reserved area. Current liberalization policies promoting competitive entry may put the traditional universal service and its financing at risk. Hence, there is an increased interest in estimating the cost of universal service provision.

In the postal sector, the Third EC Directive proposes a calculation approach to determine the net cost of a universal service obligation and to compensate the universal service provider (USP). In this paper, we discuss various implementations of the costing and financing of USO based on profitability cost and argue that a holistic approach is appropriate to meet the core requirements of consistency and robustness.

Authors: Jaag, Christian, Trinkner Urs, John Lisle, Navin Waghe, Erik Van Der Merwe

To the publication

The financing of universal service has traditionally relied on granting the universal service provider a reserved area. Together with growing electronic substitution, current liberalization policies promoting competitive entry may put the traditional universal service at risk. Hence, there is an increased interest in estimating the cost of universal service provision. The 3rd EC Postal Directive proposes a calculation approach to separately determine the net cost of a universal service obligation and to compensate the universal service provider (USP). This paper discusses the interaction between universal service costing and financing and shows that the EC approach may result in distorted results. It also quantifies the effects based on a model calibration with Swiss data. The results show that separate costing and financing leads to a considerable under-compensation of the USP if there is a compensation fund to which every operator contributes. The USP is over-compensated if it is exempt from contributing to the fund (pay or play mechanism). The problem of under- or overcompensation can be resolved by an integrated computation of the net cost that includes the competitive effects of the financing mechanism. Such an integrated approach results in a fair compensation of the USP.

Authors: Jaag Christian, Trinkner Urs

To the publication

Authors: Grotrian Jobst, Jaag Christian, Trinkner Urs

To the publication

Authors: Dietl, Helmut, Jaag Christian, Lang Markus, Trinkner Urs

To the publication

Authors: Dietl Helmut, Jaag Christian, Lang Markus, Lutzenberger Martin, Trinkner Urs

To the book

Author: Jaag Christian

To Publication

Authors: Maegli Martin, Jaag Christian, Koller Martin, Trinkner Urs

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.

Authors: Filippini Massimo, Koller Martin, Trinkner Urs

To Publication

Authors: Calzada Joan, Jaag Christian, Trinkner Urs

To Book

The postal market is one of the oldest if not the oldest network industry. After centuries of private and public postal monopolies, the EC aims to liberalize the mail market entirely whilst safeguarding the Universal Postal Service. Based on Swiss Data, the book first identifies the main drivers of mail volumes and draws special attention to «e-substitution», one of the major challenges of the postal industry. The book then assesses the most important cost characteristics of the postal market. In the core of the book, the main regulatory market models are described, modeled, and analyzed on their price and welfare implications. The last part of the book focuses on the two- sidedness of the postal market, an issue that will be crucial for successful long term regulation of the sector. In doing so, the book outlines the main regulatory challenges of the industry. For the Swiss case, it addresses the key issue whether a full market opening of the Swiss mail market is economically desirable given the current level of universal service obligations in Switzerland.

Author: Trinkner Urs

To the publication

This paper deals with two issues concerning the effects of population aging on education decisions in the presence of a PAYG pension system: We first analyze the effects of an aging population per se on individual skill choices and continuous education and the production structure. Second, we study the implications of postponed retirement, which is often proposed as a measure to cope with the economic challenges of increased longevity. Our study uses a dynamic general equilibrium framework with overlapping generations and probabilistic aging. The model allows for capital-skill complementarity in the production of final output.

As a response to population aging, in a small open economy with a fixed interest rate, our first simulation shows that GDP is depressed due to an adverse effect on skill choice and labor supply. We then introduce postponed retirement as a potentially dampening policy measure due to its encouragement of human capital formation. However, since there is less private saving in this scenario, the overall effect on GDP is even worse than in the pure aging scenario.

Author: Jaag Christian

To the publication

An important role in the implementation of liberalization processes in network industries is attributed to regulation and thus to regulatory institutions. Regulation is intended to have positive effect on social welfare by correcting market failures. But state intervention also generate costs which we call costs of regulatory governance. These costs result from negative consequences caused by unnecessary regulatory requirements or from the implementation of inappropriate regulatory instruments. According to new institutional economics, these costs will depend upon the formal and informal rules among the involved actors, upon the allocation of property rights among these actors, as well as upon the various principal-agent or more generally contractual relationships among these actors. In this article we define an analytical framework of costs of regulatory governance. We distinguish between direct and indirect costs of regulation: direct costs are related to the institutional design of the regulatory framework and to the behavior of actors, whereas indirect costs arise because of false incentives and ultimately result in an inefficient supply of goods and services. Using the example of the Swiss postal market, we offer an outline of a possible application of the framework. In the present article we neither intend to quantify regulatory costs nor do we question regulation per se. Rather, we develop a framework which helps to structure a discussion about regulatory challenges in the network industries.

Authors: Mägli Martin, Jaag Christian, Finger Matthias

To the publication

In the past decades, several countries have introduced reverse auctions for allocating universal service or public mission subsidies in various industries. Examples include urban transport, air transport and telecommunications. Recently, such mechanisms have also been envisioned in liberalized postal markets. Issuing an invitation to tender for obligations in otherwise liberalized markets significantly differs from auctioning off a monopolistic provision of services or goods (competition for the market), as is e.g. the case with spectrum auctions in the telecommunications sector. We discuss the rationale for introducing such a regulatory regime as well as
conceptual and practical issues concerning its implementation. It turns out that designing an efficient tender for universal service subsidies in liberalized markets is considerably more difficult than tendering e.g. a monopoly franchise. A first reason is that the cost assessment is more complex in the former case as future competitive market outcomes have to be anticipated; in the case with franchise bidding, at least the number of competitors is given by the tender itself. Hence, revenue effects caused by competitors are easier to calculate. Second, the threat of a winner's moral hazard requires more detailed ex ante regulations. These raise the social cost of universal service provision. Compared to direct designation of universal services with ex post compensation, tendering causes a series of fundamental concerns and trade-offs that make the application of auctions less attractive than in other sectors.

Authors: Jaag Christian, Trinkner Urs

To the publication

Author: Trinkner Urs

To the publication

Postsendungen gehören in Europa zu den Dienstleistungen von allgemeinem wirtschaftlichen Interesse. Es handelt sich dabei um adressierte Sendungen, neben Briefsendungen z. B. auch um Zeitungen, Zeitschriften und Postpakete. Im Postbereich wurden gesetzliche Marktzutrittsschranken lange Zeit mit Universaldienstverpflichtungen begründet. Die Einführung des Wettbewerbs in europäischen Postmärkten erfolgte im Rahmen einer graduellen Marktöffnung stufenweise. In der ersten Postrichtlinie (97/67/EG) ist der minimal zu leistende Universaldienst definiert und die allmähliche Einschränkung der Monopole der nationalen Postgesellschaften verankert. Im Rahmen der zweiten Postrichtlinie (2002/39/EG) ist präzisiert, dass Postmonopole in den Mitgliedstaaten nur noch zu dem Grad zulässig sind, wie sie zur Sicherstellung des Universaldienstes dienen. Die dritte Postrichtlinie (2008/6/EG) beinhaltet schliesslich die Pflicht, die vollumfängliche Marktöffnung bis zum Jahr 2011 bei vorgegebenem minimalem Universaldienstniveau in nationales Recht umzusetzen. Vollständig aufgehoben wurde das Monopol auf Briefsendungen bisher von fünf Ländern (Finnland, Schweden, UK, Deutschland und Niederlande). Die übrigen europäischen Mitgliedstaaten werden in Kürze ihre Postmärkte ebenfalls umfassend dem Wettbewerb öffnen.

Authors: Knieps Günter, Patrick Zenhäusern, Jaag Christian

To the publication

This article presents a model of talent investments where two clubs compete for prizes. Our model is based on a general class of cost functions with a constant elasticity of marginal costs with respect to investments. The analysis finds that reduced revenue sharing improves competitive balance. Furthermore, we show that a higher elasticity of marginal costs with respect to investments enhances competitive balance and simultaneously reduces the negative effect of revenue sharing on competitive balance.

Authors: Grossmann Martin, Dietl Helmut, Trinkner Urs

To the publication

Authors: Buser Martin, Jaag Christian, Trinkner Urs

To the book

Authors: Jaag Christian, Trinkner Urs

To the book

Author: Jaag Christian

Authors: Farsi Mehdi, Filippini Massimo, Trinkner Urs

To the book

The demand for mail is facing a great challenge. In recent years, substitutes such as e-mail and SMS (Short Message Service) have become a cheap, fast and convenient alternative. In the near future, new broadband-based services, the breakthrough of digital signatures, fully Web-based payment systems, and contracting solutions will further affect the mailing industry. In Switzerland, total addressed mail peaked in the last quarter of 2000, as shown in Figure 1. Since then, mail volumes have been shrinking. Yet it is not clear whether e-substitution has been the underlying cause or whether this was due to some other factor such as the economic slowdown in Switzerland between 2001 and 2003.

Authors: Trinkner Urs, Grossmann Martin

To the book

Authors: Dietl Helmut, Trinkner Urs, Bleisch Reto

To the book