French Post Office Tries to Look Cool
Subject Comparative Statics
Topic Monopoly
Key Words Advertising, Image, Monopolies, Competition, Market, Ads
News Story

The French post office has launched a new advertising campaign featuring David Bowie's 1970s hit 'Life on Mars'. The ads show dreamlike sequences, such as a soccer ball hitting a flower vase, but sailing through it without damaging it, and rain coming through a porous umbrella. A voice says that more and more things are available on the Internet, but if no one is there to deliver them, it is nothing more than a virtual world.

The visuals have little to do with postal services, but is in the tradition of French intellectual cinema. The hope is that the image of the post office will become younger and cooler. This is important because the European Community is forcing national postal monopolies to open their businesses to competition - this could mean that 20 percent of the market could up for grabs as early as 2002.

The ads are also a way to tell consumers of new electronic initiatives. They will be able to track their letters on line. They will also be able to email letters to people who do not have email - because the post office will receive and deliver them.

(Updated April 1, 2001)

1. The French postal monopoly is to end. What kind of product market structure (such as perfect or monopolistic competition or oligopoly) will exist in 2002? Explain your answer. another firm.
2. Draw a diagram of the French postal service monopoly. Include the marginal and average cost curves, as well as the demand and marginal revenue curves. Show the initial equilibrium.
a) Which curves are most likely to move due to deregulation? Why?
b) What will happen to their position and slope ? Why?
c) Illustrate this on your diagram and show the implications for the equilibrium of the French post office.
3. a) Why is a young and cool image important for the post office?
b) What is hoped to be the effect on the position and slopes of the curves you identified in (2)? What would be the implications for the company's equilibrium?
Source Marina Rozenman, "French Post Office Aims To Revamp Its Image," The Wall Street Journal Europe, February 26, 2001.

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