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18-04-2018

This assignment requires an explore of a ‘real-world’ application of economics. The assignment must be no longer than 700 words in length and write in APA 6th referencing style.

Background

In 2015, Australia Post recorded its first operating loss in a few decades, driven by a continued decline in its traditional letter business. In January 2016 Australia Post (hereafter, Aus Post) introduced some changes to their letters service. There are now three speeds for sending letters in Australia – Express Post, and the new Priority and Regular services.

Questions to be addressed

  1. Consider the market for the delivery of standard letters. Describe the market structure in which Aus Post provides this service. Provide evidence and arguments in support of your claim (with respect to market structure). The discussion could address issues such as the number of sellers, how price is determined, entry/exit to this market, government regulations and product characteristics.
  2. Consider why Aus Post was incurring substantial losses in 2015. Explain what was driving this both in words and by illustrating it in a market diagram. [Hint: Keep in mind how Aus Post prices are set for standard letters.]
  3. Consider the new pricing strategy that Aus Post has implemented with respect to the delivery of standard letters (in January 2016). Which pricing strategy is this? Explain. Using economic arguments, explain why Aus Post has chosen this pricing strategy and how it might benefit Aus Post.

When developing  answers a useful starting point is the article “Assessing crosssubsidy in Australia Post, 2014-2015” by the Australian Competition and Consumer Commission (as made available on the BUSS1040 Blackboard site).

INSTRUCTIONS:

  1. This essay is maximum 700 words long, not including reference list and diagrams.
  2. Use appropriate economic concepts and techniques to analyse the problem.

PRODUCT CODE:Edukonz-100274

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2.0 Question 1: The post Australia is a government owned company of Australia which provides services in all over the country. The postal market of the country is characterised with number of other private players such as Transdirect, however the price structure of the private players are way higher than the service provided by the government. Apart from that, due to the advancement of technology, the customer for the traditional post has also reduced since the last decade. 4.0 Question 3: The pricing strategy chosen by the company is the economy pricing strategy. The company does not set the prices way to low so as to make it a penetrative pricing strategy. Apart from that the prices of the services are not as higher as well to be called a premium pricing strategy. It is a pricing strategy which is economical and consistent with the behaviour of the private players in the market.

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