Subadditivity and Contestability in the Postal Sector: Theory and Evidence

Several studies have been conducted to analyze whether a regulation of the
postal sector as a monopoly is actually ecient by examining its cost structure.
The authors detected signicant scale economies only in the delivery
function and hence demonstrated a necessity for competition in the upstream
operations. The primary purpose of this paper is to summarize the basic conditions
of natural monopoly theory and to review the approaches and results
of the studies dealing with this topic. Despite the importance of contestability
in this context, previous literature concentrates only on the subadditivity
aspect. The existence of economies of scale does not inevitably justify a governmental
maintenance of the monopoly if the market is contestable. In this
respect, further research is needed in order to account for contestability.