Analysis of competitive and economic effects of proposed regulatory price increases for package delivery


CRA Vice Presidents Dr. Debra Aron and Dr. Justin Lenzo advised the Package Coalition and prepared a public white paper analyzing the effects of proposed price increases for package delivery services charged by the U.S. Postal Service (USPS) on the package delivery industry in the U.S. and on the viability of the USPS.  The Trump administration had proposed requiring the USPS to substantially increase—specifically, quadrupling—the prices it charges for package delivery.  Because the USPS provides package delivery services to its competitors such as UPS and to large on-line retailers, as well as to individual customers, the proposed policy would substantially alter the competitive landscape of the industry.

The authors conducted a detailed study of industry dynamics, delivery technology, and competition.  They found that the proposed price increases, and even more moderate but significant price increases for package delivery, would force the USPS to exit the package delivery business, threatening the financial viability of the USPS.  It would also damage e-ecommerce and disproportionately harm small businesses but would benefit package delivery competitors.  The proposed price increases were not adopted but continued political pressure for price increases from some parties is likely.

For more information, see the Package Coalition press release.

The Package Coalition is a coalition of businesses that rely on package delivery services, including Amazon, Ebay, Pitney Bowes, and others.

In addition to Drs. Aron and Lenzo, CRA’s Chloe Sun, Yumeng Wang, and James Meiners contributed to the project.

Additional contributors