About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

170 IRET Congressional Advisory 1 (2004)

handle is hein.taxfoundation/iretcgadv0167 and id is 1 raw text is: INSTITUTE FOR RESEARCH ON THE ECONOMICS OF TAXATION IRET is a non-profit 501 (c)(3) economic policy research and educational organization devoted to informing the public about policies that will promote growth and efficient operation of the market economy. April 1, 2004 Advisory No. 170 THE DANGER OF MONOPOLY-SUBSIDIZED PRICING BY THE POSTAL SERVICE IN COMPETITIVE MARKETS Executive Summary Federal laws grant the Postal Service, an arm of the government, monopolies on non-urgent letter delivery and access to mailboxes. If not carefully regulated, the Postal Service could abuse those dual monopolies by charging very high prices to consumers within its sheltered market. To provide some protection, the Service must seek approval from another, independent federal agency, the Postal Rate Commission (PRC), before changing its products' prices. The Postal Service also operates in many non-core markets that are not shielded by its monopolies and in which it faces vigorous competition from private-sector businesses. The Postal Service's prices in those markets are generally also subject to regulatory oversight. The Postal Service has long argued that current price regulation is too burdensome and should be loosened. A natural concern, however, is that less regulation of core products would increase the danger that the Service would abuse its monopoly power. It might seem at first glance, though, that little pricing supervision is needed in markets where competition protects customers against excessively high prices. In fact, careful regulatory oversight is also needed there. The danger in competitive markets is that the Service will cause damage by setting prices that are too low. Whereas private-sector businesses try to avoid predatory pricing because it hurts profits, there are strong incentives at government-owned entities to push prices too low in competitive markets to fuel expansion. If a government enterprise like the Postal Service is not prevented from underpricing its competitive-market products, the agency will hurt itself financially, and its captive-market customers will likely suffer as the agency tries to compensate by raising prices where it has monopoly power. Taxpayers will be injured if the low prices lead to a taxpayer bailout, and government revenue collections will weaken as taxpaying businesses are displaced by the tax- exempt Postal Service. Given the relative inefficiency of government agencies, Postal Service expansion in competitive markets will also damage the economy's productivity. One reason the Postal Service gives for demanding more rate-setting flexibility is that the rate- setting process is slow and cumbersome. However, the Service has ignored or resisted many ways to speed up and improve the rate setting process that would still maintain prudent safeguards. g~em 0 I lie I ~ Agg

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most