radford@calgary.UUCP (Radford Neal) (01/17/86)
> > --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