This paper enhances the defender model by explicitly modeling the cost associated with quality attributes. It considers two firms and two quality attributes which cause fixed and variable cost, respectively, together with the price attribute. Hence, firms compete in three dimensions. The optimal...

The focus of our paper is on the competitive effects of the proposed VAT regime relative to selected alternatives. We also highlight the welfare effects of various VAT scenarios. While an exempt operator cannot reclaim VAT paid on inputs (relevant for non-labor inputs only) and therefore faces...

In this paper we analyzed the strategic competition between incumbent postal operators and market entrants in liberalized letter markets based on the “defender consumer model” pioneered by Hauser and Shugan (1983) and derived qualitative normative implications on how an established firm...

Distortions under the value-added tax (VAT) arise mainly from the exemption of specific services and sectors. This paper develops an analytical model that is applicable to any sector characterized by asymmetric VAT exemptions of services and activities or differentiated VAT rates. We analyze the...

This paper assesses the potential of a combined “USO in communications”, i.e. a USO that simultaneously defines the physical and digital requirements for the conveyance of communication irrespective of the specific sector.

Universal service providers (USP) are increasingly active in business segments other than the segment consisting of their Universal Service Obligation (USO). Price regulation of USO services is usually cost-oriented and differentiated between USO- and non-USO-products. Hence, regulatory rules on...

The financing of the Universal Service Obligation (USO) in network industries has traditionally relied on granting the provider exclusive rights. Full liberalization has created the need for alternative funding mechanisms. This has increased the interest of regulators and the public in...

Market opening in the postal sector invites competition, but it may also present challenge to financing the universal service obligation (USO) currently in place. USO financing under entry is challenged both by the loss of revenues and scale economies in combination with the affordability...

The financing of universal service provision in the postal sector 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...

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...