Abstract
This chapter examines and estimates demand price elasticities for Royal Mail postal parcel volumes, using an econometric analysis of data from more than 40,000 Royal Mail customers followed each quarter over 5 years and distinguishing intensive and extensive margin elasticities.
The views expressed in this chapter are those of the authors and do not necessarily reflect those of their affiliated organizations. Fève and Magnac thank ANR for support under grant ANR-17-EURE-0010 (Investissements d’Avenir program). We would also like to thank Bruno Basalisco for helpful comments on an earlier draft of this chapter.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Similar content being viewed by others
Notes
- 1.
Royal Mail account customer parcel products are not subject to price controls and are not strictly subject to fixed list prices, with salespeople having a degree of discretion when pricing individual customer contracts.
- 2.
This product group included untracked RM24 and untracked RM48 parcel and large letter formats.
- 3.
The two product groups consist of RM Tracked 24 and Tracked 48 parcels.
- 4.
All technical points related to the computation of elasticities and their standard errors with and without selection are elaborated in an Appendix available upon request.
- 5.
There is no reason why the estimated homogenous elasticity should lie between the heterogeneous ones since the latter estimates are using mostly the within product variation. In addition, formal tests reject the homogeneity assumption, which explains why we also pursue a within-product empirical analysis in Sect. 4.
- 6.
The significance of Mills ratio has two consequences. First, standard errors are incorrect because of the issue of generated regressors and in general standard errors slightly inflate. Second, the computation of elasticities requires an additional correction factor. We report below in Table 4 the latter correction factor and its standard error. We did not correct for the former issue because of tedious computations and acknowledge that standard errors could be slightly higher but usually not by much.
References
Borjas, G. J. (1980). The relationship between wages and weekly hours of work: The role of division bias. The Journal of Human Resources, 15(3), 409–423.
Bzhilyanskaya, L. Y., Cigno, M. M., & Pearsall, E. S. (2015). A branching AIDS model for estimating U.S> postal price elasticities. In P. L. Parcu, T. Brennan, & V. Glass (Eds.), Postal and delivery innovation in the digital economy (pp. 91–113). Springer International Publishing.
Davidson, R., & MacKinnon, J. (2004). Econometric theory and methods. Oxford University Press.
Fève, F., Magnac, T., & Soteri, S. (2020). Demand elasticities at the intensive and extensive margins for advertising mail traffic in the UK. In P. L. Parcu, T. Brennan, & V. Glass (Eds.), The changing postal environment (pp. 213–224). Springer International Publishing.
Heckman, J. J. (1979). Sample selection bias as a specification error. Econometrica, 47(1), 153–161.
Hsiao, C. (2004). Panel data. Cambridge University Press.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Appendix
Appendix
Rights and permissions
Copyright information
© 2024 The Author(s), under exclusive license to Springer Nature Switzerland AG
About this chapter
Cite this chapter
Fève, F., Magnac, T., Pope, J., Soteri, S. (2024). UK Postal Parcel Traffic Price Elasticities: Intensive and Extensive Margins and Selection Bias. In: Parcu, P.L., Brennan, T., Glass, V. (eds) Service Challenges, Business Opportunities, and Regulatory Responses in the Postal Sector. Topics in Regulatory Economics and Policy. Springer, Cham. https://doi.org/10.1007/978-3-031-65599-9_8
Download citation
DOI: https://doi.org/10.1007/978-3-031-65599-9_8
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-031-65598-2
Online ISBN: 978-3-031-65599-9
eBook Packages: Economics and FinanceEconomics and Finance (R0)