“Co-opetition” in US parcel delivery

“Co-opetition” in US parcel delivery

The US Postal Service (USPS) Office of Inspector General (OIG) has published a new paper which claims that there is potential for a “win win win” situation when the USPS enters into a negotiated service agreement (NSA) with a large private parcel carrier. In other words, the study, which was authored by Dr. John C. Panzar, professor of economics, University of Auckland, argues this could be a triple win: for USPS, the private parcel carrier and the consumer.

The OIG study explained: “The Postal Service is better off through increased revenues, competitors are better off through lower delivery costs, and consumers potentially benefit from lower prices”.

The Executive Summary of the OIG report commented: “This result occurs because through co-opetition the Postal Service and the private parcel carrier create the more efficient end-to-end parcel delivery service. The private firm provides the more efficient mail processing and transportation, and the Postal Service provides the more efficient delivery portion. If efficiency gains are high enough, co-opetition can lead to overall lower end-to-end (E2E) prices for parcel customers.”

The Summary added that “under the assumptions of Professor Panzar’s model”,  it was found that “the
greatest efficiency is obtained when upstream parcel volume is handled by the private sector but delivered by the Postal Service”.

Click here to access a copy of the OIG report.




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