South-Western EconNews

"When it absolutely, positively, has to get there…even FASTER!"

Subject

Non-Price Competition, Increase in Technology, Increases in Efficiency

Topic

Monopolistic Competition; Production and Costs; Profit Maximization and the Firm

Key Words

Competition, Technology, Efficiency

News Story

UPS is pledging to reduce its ground delivery time by at least one day in many of the biggest metropolitan areas. Using innovations in technology, such as a quicker train service, a streamlined trucking network, and changed sorting location hubs, UPS will make the package-delivery industry even more competitive. This move underscores the fact that service is one way in which firms like UPS maintain its competitive edge. This will make ground delivery almost as fast as air delivery, at about 1/3 the charge.

Firms in this market must continue to respond to change, although they change in different ways. DHL Worldwide attempted to increase its market share by purchasing Airborne, Inc. The US Postal Service, on the other hand, has had reductions in its Priority Mail services, as well as service problems, making it much less competitive than in recent years.

(Updated October, 2003)

Questions

1.	In this monopolistically competitive market, what kind of non-price competition is seen? Why do these firms not compete on prices?
2.	What will the new technology do to UPS' profits in the short run, and in the long run? Why will this happen?
3.	Do the technological advances that UPS is implementing constitute long-run changes, or short-run changes? Why?

Source

Rick Brooks, "UPS Cuts Ground-Delivery Time." The Wall Street Journal. 6 October 2003.