Co-opetition (a form of collaboration among competitors) between the U.S. Postal Service and its rivals improves the efficiencies of the postal sector.
If efficiencies are great enough, co-opetition can lead to lower shipping prices.
E-commerce and changing consumer demand have led to an explosion in parcel shipping, which in turn is driving dynamic change in the parcel market. Not only has increased demand for parcels benefitted the providers of parcel services through increased volume, it has also changed the relationship between players in the market. In order to remain competitive, firms are beginning to collaborate with their once rivals — providing processing, transportation, or delivery for each other — something we refer to as co-opetition. For example, both UPS and FedEx use the Postal Service to provide last-mile delivery for a significant portion of their ground parcels.
The OIG invited Dr. John C. Panzar, professor of economics, University of Auckland, to examine the economic efficiency of co-opetition in the parcel market and the relationship among the crowded field of players. Co-opetition in Parcel Delivery: An Exploratory Analysis details Professor Panzar’s research and findings, which show that co-opetition is not inherently anti-competitive or bad for consumers. On the contrary, the paper demonstrates what Professor Panzar calls a “win-win-win” phenomenon: the Postal Service benefits by earning additional revenues through last-mile delivery, private package carriers benefit from a lower delivery cost, and all of it happens without the customer paying a higher price. In fact, it is possible that co-opetition can lead to an overall price decrease for the customer.