Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP
Posting-Version: version B 2.10.2 9/18/84; site calgary.UUCP
Path: utzoo!utcsri!ubc-vision!alberta!calgary!radford
From: radford@calgary.UUCP (Radford Neal)
Newsgroups: net.politics.theory
Subject: Re: The Mail, and Differentiated Prices
Message-ID: <48@calgary.UUCP>
Date: Fri, 17-Jan-86 02:41:44 EST
Article-I.D.: calgary.48
Posted: Fri Jan 17 02:41:44 1986
Date-Received: Fri, 17-Jan-86 12:14:49 EST
References: <352@ihnet.UUCP>
Distribution: net
Organization: University of Calgary, Calgary, Alberta
Lines: 20

> > --Barry Kort
> > the British Post Office charged according to weight*distance.
> > Then a Minister of Posts introduced a flat rate independent of
> > distance.  People were then able to affix stamps to their mail,
> > and fewer postal clerks were needed.  The average cost of sending
> > a letter dropped.  The system worked because the Post Office was
> > a monopoly.  

It's not clear a monopoly is required. Lots of private enterprises 
charge similar flat rates when the administrative costs of differential
pricing is excessive - e.g. flat rate (within some area) pizza delivery.

If a private post-office were to introduce flat rates (which we assume
produce a net saving), they might loose some business at the low end
to companies with differential rates. This is fine unless the effect
diverges - the flat rate company then has to raise rates, causing more
customer defections, etc. In many cases the effect will converge instead,
probably including all the ones where the flat-rate savings is large.

     Radford Neal