Canada Post Monopoly Essay

The Canada Post Monopoly and Strategies for Pricing with Market Power

Canada Post Corporation has long dominated the Canadian postal market, providing essential mail and parcel services to the country's large population. This paper examines the dynamics of Canada Post's market power and analyzes the various pricing strategies it employs to maximize its profits. It also addresses the issue of monopoly control and assesses the impact of these strategies on consumers and potential competitors.

Market power is the ability of a firm to influence the price of an item in the market (Kenton, 2022). This influence can be used to create favourable conditions for the company, potentially leading to higher profits. A monopoly exists when a single

Price Discrimination can be implemented through first-, second-, and third-degree price discrimination. First-degree Price Discrimination involves charging each customer the maximum price they are willing to pay for a given service. While it is difficult to implement in practice, advancements in data collection and analysis could help Canada Post better understand individual customers’ willingness to pay and tailor prices accordingly. Second-degree Price Discrimination involves offering different prices for different quantities of the same good or service. For example, Canada Post offers express, priority and economy delivery options with corresponding price differences. Canada Post also provides discounts for customers that ship a large volume of packages or are enrolled in their VentureOne loyalty program (Mitchell, 2014). By doing so, the organization caters to customers with unique needs and budgets, maximizing revenues across the board. Lastly, Third-degree Price Discrimination involves charging different prices to different customer segments based on factors such as location, volume, or customer type. For instance, Canada Post offers discounted prices for businesses over consumers, domestic shipping over international shipping and specific segments like non-profit organizations, educational

In the context of Canada Post, this could entail charging a membership or subscription fee that grants customers access to discounted shipping rates. The variable fee would then be based on factors such as package weight, distance, or delivery speed. Examples that Canada Post uses include PO Box rentals and customized direct mail. Canada Post charges an annual fixed fee for renting a PO Box as well as variable fees for mail forwarding and holding. Canada Post uses its Precision Targeter tool to allow businesses to create custom direct mail campaigns for specific areas (Canada Post, n.d.). This tool has a fixed fee for access to it and an additional variable fee based on the quantity of mail sent. This strategy can help Canada Post increase its revenue by capturing consumer surplus from both the access fee and the usage