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Based on the multi-product cost function theory of
Baumol,Panzar and Willig(1982), this study tries to
investigate the multi-product cost structure of postal
service in Taiwan. From the estimation results we found that:
1.Under current output mix, the postal service in Taiwan
showed a weak multi-product scale economies (close to 1) and
scope economies. However, as a multi-product industries, the
postal service in Taiwan is not a natural monopoly. 2.Among
all outputs, "prompt & speedpost" service has the highest
marginal cost, and "ordinary letters" has the lowest. For
second and third classes post offices, third class post
office has higher marginal cost because it''s far from central
business district(CBD). 3.The Allen partial elasticities of
substitution and price elas- ticity indicated that slow
progress of postal service automa- tion made the use of labors
for mail processing inefficiency. 4.Among all outputs, the
"prompt & speedpost" service has the lowest cost elasticity,
"parcel & registered" service has the second lowest. 5.From
the analysis of cost advantage of the network variables, we
found that: (1)Total variable cost would increase when the
number of postal boxes increased. (2)Postal office would
decrease its cost by means of handling more mails in a fixed
delivered region； the quantity of the mails handled by a
"central" post office still tends to be too low to enoy the
density economies. (3)The different environment between
regions would resulted in different cost structure ；
directorates of post regions and special class post office
have cost advantages by means of handling mails automatically
and mechanically.
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