Abstract
The peak-load pricing problem for postal service is addressed in practice primarily by means of service differentiation according to class of mail. The authors demonstrate that lower priority mail at peak times helps to ameliorate, but does not eliminate, the peak-load problem. They derive welfare-optimal, service differentiated prices under peak-load conditions for a diverse mail-processing technology. The authors show the relationship between this class of problems and the traditional natural monopoly peak-load literature. The paper discusses the implications of the theory for U.K. and U.S. postal service practice and policy. Copyright 1990 by Royal Economic Society.
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