f-jE\~i$?&
liECEIVE[I
BEFORE THE
POSTAL RATE COMMISSION
20268-0001
WASHINGTON, D.C.
OCT21 2 06 Ply '96
FCSThim-r, ,;.:'<i,i:!
,;:..',
'CiTi,:::c<;;;rb,fly
'OFFICE
Special
Services
Docket
Fees and Classifications
No. MC96-3
ANSWERSOF THE OFFICE OF THE CONSUMERADVOrATE
TO INTERROGATORIES OF UNITED STATES POSTAL SESRVICE
WITNESS: ROGER SHERMAN (USPS/OCA-TlOO-1-5 and 6d-18)
(OCTOBER21, 1996)
The Office
of the Consumer Advocate
of Roger Sherman to interrogatories
dated
October
redirected
verbatim
and is
Collins.
followed
the (answers
submits
USPS/OCA-TlOO-1-5
Interrogatory
1996.
to Witness
Witness
filed
I,
hereby
and 6d-18
USPS/OCA-TlOO-6a-c
Each interrogatory
was
is stated
by the response.
Sherman is out of town and his
declaration
will
later.
Respectfully
submitted,
EMMETTRAND COSTICH
Assistant
Director
Office of the Consumer Advocate
be
ANSWERSOF OCA WITNESS ROGERSHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-l-18
Please refer to page 4 line 1 of your test:imony.
USPS/OCA-TlOO-1.
or the principle
of optimal
Please define
"optimal
pricing"
a.
pricing.
Please identify
all distinctions
between "optimal
pricing"
and
b.
"market based pricing"
as you understand
those terms.
A.
a.
goal.
"Optimal
Often,
pricing
that
defined
(usually
consumer
consumers
surplus
maximize
that
pricing
situation
welfare
maximize
cost
would
produce
would
definite
that
producer
having
If
pricing
optimal
purpose.
the
external
would
pricing
is
between
actually
pay,
a deficit
goal
bre#?.keven,
Service,
them into
the best
will
prices
anId the
diseconomies
take
that
I:? cases where
welfare.
Postal
what
and
circumstances,
the enterprise
seem to fit
welfare
:surplus
can be derived
in simple
will
optimal
is
and prices
case
:Social
the difference
costs
while
(an explicit
pricing."
plus
represents
serves
and in that
optimal
For example,
are Ramsey prices.
main point
welfare,
surplus
is profit),
marginal
that
that
to pay and what they
goal.
as pollution),
certain
surplus
at marginal
to maximize
social
"socially
are willing
equal
is
is pricing
as consumer
producer
prices
goal
may be called
is often
that
pricing"
pricing
is
a
optim,al
existed
(such
accoun-t.
for
The
a
ANSWERSOF OCA WITNESS ROGERSHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-l-18
CONTINUTATION OF ANSWERTO USPS/OCA-TlOO-1:
"Market-based
b.
is
determined
yield
market
fierce
pricing"
in markets.
normally
so their
effects
prices.
So "market-based
specific
whereas
goal.
based on pricing
of market
monopoly
and so the possibilities
competition,
outcomes,
A host
from virtual
pricing,
Externalities
is presumably
would
are not
not
"optimal
reflected
ordinarily
pricing"
pricing"
possibilities
will
circumstances
to
cover
i3 wide
in market-based
be remedied
can cover
is pricing
that
prices,
in market
a wide
that
range.
range
best
Iof
serves
a
ANSWERSOF OCA WITNESS ROGER SHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-1-18
USPS/OCA-TlOO-2.
Please refer
to page 5 lines
lo-13 and page 9
lines 15-22 of your testimony.
I!ou state
that
it appears that money orders
are currently
a.
priced
below attributable
costs.
Provide
citations
to the
record to support this proposition.
In what respect
are money orders
a money losing
special
b.
service?
How do ,money orders fail
to cover their attributable
co.sts?
C.
Is it your testimony
that money orders fail
to meet criterion
d.
(b)(3) of section
3622 of Title
39, United States Code?
What type of characteristics
would you expect the recipients
e.
of money orders to exhibit?
What type of characteristics
would you expect the recipients
f.
of COD service to exhibit?
A.
a.
The Direct
USPS-T-5G,
page 24, provides
money orders
it
attributable
costs
cost
is
amount.
b.
If
financial
of Richard
Patelunas
FY 96 Current
Rates
revenues
of $195.4
as -$25.8
attributable
cost
in USPS-T-5G for
to contribute
drain
of $169.7
of attributable
exceeds
revenue
money orders,
to institutional
on other
failure
of the
service
respect
the reported
orders
a money losing
to cover
financial
service.
that
that
its
mix:).
attributable
nagative
is reported
a service,
servicls
but
also
performance
a:s
not
is
must make up for
attributable
For
(and
cost
for
costs
services
(with
million
a substantial
million,
in MC96-3,
Revenue less
million.
Revenue as a percent
percent.
fails
reports
reported
86.8
reported
Testimony
co,sts.
only
a
the
In that
,would make money
as
ANSWERSOF OCA WITNESS ROGERSHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-l-18
CONTINUATION OF ANSWER TO USPS/OCA-TlOO-2:
C.
I am not
in a position
fail
to cover
their
d.
If
the
page 24,
attributable
revenue/cost
cost
criterion
would
(b)(3)
or type
costs
attributable
to that
other
costs
Postal
class
or type."
order
by recipients
myself,
receive
but
service
Service
requirement
the direct
or type
plus
reasonably
to speculate
I don't
to cover
their
the USPS from meeting
about
that
each
and indirect
postal
that
of all
portion
assignable
to such
the characteristics
I have received
of money orders.
know the characteristics
a money
Iof others
who
them.
I am in no position
exhibited
"the
bear
class
in lJSPS-T-SG,
of money orders
3622,
service
I am in no position
exhibited
f.
of the
reported
seem to prevent
class
e.
failure
of section
of mail
as to how money orders
costs.
relationships
the
are correct,
attributable
to speculate
by recipients
myself,
who have received
but
t.o speculate
of COD service.
I do not
about
the
cha:racteristics
I have recleived
know the characteristics
COD
of others
it.
__
.--
ANSWERSOF OCA WITNESS ROGERSHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-l-18
USPS/OCA-TlOO-3.
Please
refer
to page 6 lines
3-9 of your
testimony.
Please define your understanding
of "market power."
a.
identify
Please
all
quantitative
means, measurements,
or
b.
equations
known to you by which market power or monopoly power
may be evaluated.
Please attach
copies of pages 97-102 of F.M. Fisher et al.,
C.
Folded,
Spindled,
and Mutilated:
Economic Analysis
of U.S.
Trs . IBM to your response to this interrogatory.
A.
"Market
a.
power
is quite
to have an influence
The subject
b.
subfield
is
power"
power comprises
called
to summarize
industrial
briefly.
market
power have been proposed.
to the
late
ratio
economist,
of the
(p-mc)
to price
the
idea
that
this
will
equal
that
One crucial
which
will
price
rises,
estimating
(p),
between
price
source
inhibit
(p-mc)/p.
the
monopoly
called
level
is
due
the
is
"price-cost
margin,"
from competing
of demand.
an entry
if
barrier,
the
have been proposed
barriers.
cost
set price
new firms
of entry
e;arliest
will
power
methods
of
1.t comes from
of market
and several
which
measures
and marg,inal
where e is the price-elasticit,y
l/e,
the
and is basad on the
or the ratio
sometimes
organization,
One of the
a profit-maximizing
ratio,
as being
an (entire
Several
Abba Lerner,
difference
accepted
on price.
of market
of economics,
impossible
generally
current
for
Based on the
so
ANSWERSOF OCA WITNESS ROGER SHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-l-18
CONTINUATION OF ANSWERTO USPS/OCA-TlOO-3:
difficulty
of raising
enterprise
that
in an industry
figure,
can operate
market
and then
is
the
four-firm
fraction
of industry
measure)
accounted
Another
the
this
market
for
approaches
one for
monopoly
themselves,
these
concentration
ensure
market
power will
it.
that
Some significant
to be needed.
of market
power,
advantage,
also
market
measure
power.
measures
exist,
possibly
Although
is
various
what are seen as sources
is
of market
the
sum of all
competition.
By
they
thought
might
give
generally
another
by patent,
attempts
or other
This
based on a patent.
protected
the
industry..
barrier
differentiation
sometimes
is
in an industry.
are not
but
to
of "concentration"
which
which
for
have
to contribute
firms
in the
and zero
form of entry
Product
four
firms
will
effectively.
or employment,
index,
this
The simplest
ratio,
by the largest
shares
deployed
measures
(or assets,
scale
more capital
conception.
measu~re is the Herfindal
squared
to form an
The greater
thought
concentration
sales
for
is also
and various
have been used to represent
measure
example.
since
number of firms
power of each,
for
is entry,
in the capital
a small
needed
at the minimum efficient
the more difficult
the market
the capital
has been estimated,
to be raised
Having
capital,
number
to
ri.se
to
is thought
possible
source
And a cost
can be a source
have been made to
power,
the
ultimate
of
ANSWERSOF OCA WITNESS ROGERSHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-l-18
CONTINUATION OF ANSWER TO USPS/OCA-TlOO-3:
form that
C.
-
power
takes
is
See OCA-LR-4.
-.-__--.~
-
the capability
to affect
price.
ANSWERSOF OCA WITNESS ROGERSHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-1-18
USPS/OCA-TlOO-4.
Please refer
to page 13 lines
23-25 elf your
In reaching
your conclusion
that it ia difficult
to
testimony.
identify
costs for the new levels
of insurance
service,
did you
consider Lyons WP A page 5 before your testimony
was filed?
A.
My remark
criticism
record
about
the difficulty
of Lyons WP A, but
drawn
estimation
from providing
of cost
would
of identifying
rather
the
was noting
service
be more difficult.
(cost was not
that
in the past,
without
the
a
a
ANSWERSOF OCA WITNESS ROGERSHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-l-18
USPS/OCA-TlOO-5.
Please refer to pages 15 line 19 to page 16 line
15 of your testimony.
a.
I?lease provide
all
information
of which
you were aware
regarding
Mr. Popkin's
background and credentials
at the time
you drafted
your testimony
in this docket.
b.
or
Have you ever cited Mr. Popkin in any other publication
publicly
available
document?
C.
Are you familiar
with Mr. Popkin's
educational
background and
credentials?
If so, please explain in full.
d.
Are your
conclusions
based on the belief
that
handling
procedures
and transportation
methods for uninsured
registry
do not vary as value of the article
increases?
A.
a.
I knew nothing
credentials
at the
time
b.
No.
c.
No.
d.
I was unable
possible
postal
that
cost
Mr.
lacked
lacking.
a record
endorsed
on which
Popkin's
I drafted
to reach
Popkin's
information
The Commission
of Mr.
and
my testimony.
conclusions,
argument
by value
background
would
category
exploration
to consider
of this
it.
except
to say it
be suppor,ted
if
it
is
with
was availab #le.
questio:n
in R9,4-1 but
The recors3 is
still
ANSWERSOF OCA WITNESS ROGERSHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-l-18
to page 18 line
15-18 of your
Please refer
USPS/OCA-TlOO-6.
testimony.
Do you contend that witness Needham has not presented
accurate
a.
proposed certified
mail costs and revenues at Tr. 4/1073 for
Docket Nos. R90, R94, and MC96-3?
but an unqualified
no,
If your answer to (a) is anything
b.
please identify
all inaccurate
information
at Tr. 4/1073, and
explain
how one would derive accurate
information
about costs
and revenues for certified
mail.
What is your understanding
of the after-rates
cost coverage
C.
f-or certified
mail in Docket Nos. R90 and R94? Please explain
in detail.
Do you contend that any past inaccuracies
in the manner in
d.
which certified
mail revenues,
costs,
and cost ,coverages were
which in fact contributed
to pure certified
mail
reported,
(see Tr. 4/'1073),
should
cost coverages
below 100 percent
remedial
steps in this
preclude
the Commission from taking
proceeding?
A.
al.-c.
cl.
inaccuracies
from taking
testimony
Redirected
Of course
for
should
I do not
certified
remedial
to Witness
steps
suggest
contend
mail
that
past
would preclude
in this
that
Collins.
I do.
proceeding.
cost
or revenue
the Commission
No reading
of my
ANSWERSOF OCA WITNESS ROGER SHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-l-18
Please refer
to page 18 lines
23 to 26 of your
USPS/OCA-TlOO-7.
testimony.
Could an explanation
for the fact that a product
is much less
a.
costly
than alternatives
to that product
be th,at the product
is priced below cost?
Could an explanation
for the fact that a product
is much less
b.
costly
than alternatives
to that product be th,at the product
is priced below market price?
Do you contend that it is irrational
for a firm to attempt to
C.
raise
prices
of its
products
to be closer
to prices
of
alternative
products?
Yes,
A.
a.
than
alternatives
If
b.
normally
price
would
because
a product
to raise
can be expected
appropriate
be part
it
below
to have a lower
below
below market
irrational
of its
at every
for
for
price,
would
since
a private
not
its
firm
to be closer
seeking
opportunity.
a public
it
price.
products
Profit
products.
price
cost.
alternatives
of the market
is not
however,
a product
is priced
is priced
to do it
action,
the public.
it
the prices
of alternative
for
to be priced
normally
Of course
attempt
serve
is possible
be be said
c.
prices
it
private
It
enterprise
to
to
retailers
:may not
be
that
is to
ANSWERSOF OCA WITNESS ROGERSHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-l-18
USPS/OCA-TlOO-8.
Please refer to page 20 lines
24-;!6 and page 21
lines l-4 of your testimony.
a.
As a general
matte;,
is a mailer
better
off
sending
a
mailpiece
with the correct
or an incorrect
address?
b.
do you think a mailer
would prefer:
What, in your opinion,
sending a mailpiece
with an incorrect
address or sending a
mailpiece
with a correct
address?
E'lease identify
all of the advantages that accrue to a mailer
C.
who uses a correct
address versus one who uses an incorrect
address?
d.
blhat do you understand
to be all of the disadvantages,
from
t:he mailer's
perspective,
of using an incorrect
address'?
would you agree with the proposition
that
correct
address
e.
and telephone
information
information
could
aid a caller
a telephone
customer,
particularly
operator
in identifying
when the listing
sought is of a customer with a common first
and last name, such as James Brown or David Smith?
If not,
why not?
f.
Isn't
it true that a correct
address could aid an individual
j.n addressing
a package sent via an alternative
delivery
carrier?
Isn't
it true that correct
address information
could aid an
g.
emergency assistance
personnel
such as fire or police
services
j.n promptly
providing
assistance,
particularly
when such
services
are requested by one individual
on beh#slf of another
person located elsewhere?
Of course
A.
a.
mail
piece
address.
with
It
the
the disadvantages
but
that
the mailer
spending,
correct
is generally
address
is up to the mailer
make to have correct
suppose
a mailer
say,
addresses,
of using
better
than
with
to judge
know which
an additional
$.40
addresses
every
is
a
incorrect
an effort
to
suffers
For example,
address.
address
for
sending
as the mai:Ler
99 out of 100 of a mailer's
does not
the
how great
however,
an incorrect
off
are correct,
incorrect.
item
ma.iled
Then
in order
ANSWERSOF OCA WITNESS ROGERSHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-l-18
CONTINUATION OF ANSWERTO USPS/OCA-TlOO-8:
to obtain
$40.01)
address
information
($.40x100).
incorrect
expenditure
quality
for
be greater
mailer.
That
usefu:L,
should
Of course
of interest
but
rather
of
one
a mailer's
will
address
depe:nd on how high
The $40.00
example
would
might
be worth
to the
how much to s,pend to obtain
to the mailer.
would
rather
correct
in this
about
be left
only
information.
correct
a mailer
address
The question
addresses
is why the choice
a correct
would
correction
the
in an expenditure
shows that
of address
than
addresses
with
improved
one address
easily
b.
expenditure
to pay for
is the present
result
and the exercise
address,
willingness
correct
This
would
than
prefer
with
sending
a mail
an incorrect
is not whether
a correct
how much is obtaining
piece
address.
aJdress
the correct
is
address
worth'?
c.
follow
I cannot
from having
The main advantage
piece
can reach
different
the
value
advantages
decide
its
enumerate
a mail
piece
of using
of correct
possible
reach
advantages
its
a correct
intended
to different
all
address
destination,
mailers.
addresses
how much to spend in seeking
intended
is
which
them.
might
destination.
that
the mail
can have
Each mailer
relative
that
has to weigh
to their
And mailers
cost
and
should
ANSWERSOF OCA WITNESS ROGERSHEPXAN
TO INTERRCGATORIESUSPS/OCA-TlOO-l-18
CONTINUATION OF ANSWER TO USPS/OCA-TlOO-8:
have a choice,
Service
as they
to improve
ct.
of a mail
do now, whether
their
I cannot
enumerate
piece
reaching
its
not
mailers.
and so they
correct
using
to have different
may face
each mailer
Again,
all
intended
of a mailer's
can be expected
may be willing
the
Postal
information.
Of course
the main disadvantage
and it
address
to employ
possible
disadvantages
destination.
That
an incorrect
costs
address,
to different
different
to pay different
is
disadvantages,
amounts
to obtain
addresses.
e.
Yes,
a correct
the
question
(a) above,
useful,
but
willing
question
each mailer
9 out
of 10 mailers
charges
for
correct
most mailers
accuracy
is
are unwilling
address
of its
correct
in position
see no need for
in view
a correct
is the usefulness.
to pay to obtain
As explained
can be useful.
is not whether
how great
a mailer
address
address
in
is
On average,
how much is
addresses'?
This
to answer.
At present
to pay what the
information,
which
marginal
improvement
cost.
f .
Yes,
a correct
address
can be useful.
(J.
Yes,
a correct
address
can be useful.
is
Postal
indicates
a
almost
Service
that
in address
ANSWERSOF OCA WITNESS ROGER SHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-l-18
USPS/OCA-TlOO-9.
Please refer
to page 21 lines
15-16 of your
testimony.
a.
Do senders of articles
having no value sent via Express Mail
subsidize,
directly
or indirectly,
the merchandise
insurance
coverage of Express Mail?
b.
Does the sender of an article
having no value sent via Express
Mail value the merchandise
insurance
feature
of Express Mail?
C.
Is it fair
combination
classification
service?
A.
a.
value
to say that
of
two
for this
I should
by Express
coverage
not
Mail
of Express
the proposal
for return
receipts
restructuring
proposals,
one
service
and proposing
a fee for
expect
that
subsidize
of articles
the merchandise
but
Mail,
senders
is a
the
that
having
no
insurance
I am in no position
to answer
the
question.
I do not
b.
know whether
article
having
feature
of Express
Mail.
No, it
does not
c.
return
receipts
classification
This
no value
would
change
is
seem fair
the no-address
option,
changed
option
service.
by Express
the merchandise
one restructuring
a fee
characterization
was involved,
because
the
Mail
fee stays
The main feature
of an
insurance
to say the proposal
proposing
even be a fair
address
sender
values
two proposals,
in the
slightly
actually
and the other
not
the
for
the
for
the
if
only
without
the
service.
the minor
elimination
same for
of the
return
that
receipt
of
ANSWERSOF OCA WITNESS ROGERSHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-l-18
CONTINUATION OF INTERROGATORYUSPS/OCA-TlOO-9:
proposal
is
that
it
presently
offered.
service.
Nor is
proposal
will
no longer
would
eliminate
one of the choic:es
The restructuring
there
continue
produces
a new fee,
since
in force.
But the no-address
the mailer
to whom and on what date
(2) to' learn
to whom,
was delivered.
(with
than
be allowed
It
in every
is not
fair
option,
the proposal
fair
(1) because
to call
it
which
is elimination
to say the proposal
is no new fee.
(2),
the
address
option
will
only
will
so minor,
the
option,
be offered.
when the main
a new fee,
item
no longer
based on the
propose
the
different
is
and will
option.
or
rate.
address
when it
of the no-address
will
was delivered,
no longer
a restructuring
is
options:
has a higher
is presently)
it
receipt
item
must choose
to be provided
case as it
to choose
the adldress
not
for
new
and to what address
option,
the mailer
the address
the
on what date,
The address
the proposal,
rather
fee
has two return
(1) to learn
(2),
no genuinely
is
be an option.
Presently
Under
the
that
change
feature
of
And it
since
in
is
there
ANSWERSOF OCA WITNESS ROGER SHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-l-18
2 of your
refer
to page 23 line
USPS/OCA-TlOO-10.
Please
testimony.
Is it
fair
to say that
a demand elasticity
of -0.17
is
a.
relatively
inelastic?
What is the effect
of a price increase on a product exhibiting
b.
relatively
inelastic
demand?
A.
price
a demand elasticity
a.
Yes,
b.
When the demand for
will
revenue,
decrease
because
the percentage
quantity
the percentage
decrease
of -0.17
a product
sold
but
is
will
increase
in quantity.
is very
inelastic.
inelastic,
raising
also
total
in price
rake
is greater
its
than
ANSWERSOF OCA WITNESS ROGER SHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-1-19
USPS/OCA-TlOO-11.
Please refer to paqe 24 of your testimony.
Are
you
aware
that
plain
postcards
may be purchased
from
a.
private
vendors?
If
your answer is affirmative,
please
explain.
Assuming that postal
cards were no longer sold by the Postal
b.
Service,
is it fair to say that privately
printed
plain postcards
I. )
would serve as an adequate substitute
for them?
fair
to say that
some of the lower
cost
2)
isn't
it
characteristics
exhibited
by postal
cards,
such as the
addressing
techniques
suggested
by witness
Patelunas,
could also be exhibited
by plain,
privately
printed
post
cards used by today's
customers of postal
cards?
Please
explain
your response.
opinion,
would be the
likely
effect
on
What,
in your
c.
attributable
costs for the post card single-piece
rate if more
lower cost pieces were entered at that rate category?
Isn't
it
true
that
all
users of the postal
and postcard
d.
for
the
manufacturing
costs of
subclass pay, to some degree,
If your answer is no, please explain.
postal cards?
postage,
for
Do private
postcard
users pay, through postcard
e.
If your answer
the stationery
provided
to postal card users?
is anything
other than an unqualified
no, please explain.
110 private
postcard
users value
free
stationery
given
to
f.
postal
card users?
If your answer is anything
other than an
unqualified
no, please explain.
Do postcard
users receive any benefit
from the free stationery
Cl.
If your answer is anything
provided
to postal
card users?
other than an unqualified
no, please explain.
A.
a.
Yes,
from private
answer
I am aware that
postcards
I can see nothing
vendors.
that
plain
may be purchased
in this
af,firmative
needs to be explained.
b.
1)
serve
Yes,
as an adequate
were not
available.
it
is
fair
substitute
to say that
for
postal
private
cards
(cards would
if
the
latter
ANSWERSOF OCA WITNESS ROGER SHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-l-18
CONTINUATION OF INTERROGATORYUSPS/OCA-TlOO-11:
cost
it
Yes,
2)
characteristics
exhibited
exhibited
by privately
customers
of postal
incentive
to generate
13.
If
cards.
cards
would
claim
card
cards
coul'd
also
the customers
for
lower
be
used by t'sday's
the Postal
were entered
unit
attributable
costs
of Witness
postcard
mailers
have no
Service.
in the post
c'osts
card
for
post
page 22.
f.
I see no reason
for
postal
pay for
cards,
not
Sheryda
Her position
to postal
the
The :manufacturing
to postal
cards
(Tr.
to
Colli'ns,
that
to OCA/USPS-T5-10
Needham to OCA/USPS-T8-37
See answer
support
is wrong.
of OCA Witness
Patelunas
No.
users--they
cards
are attributed
'e.
stationery
that
are attributed
Docket,
in an,swer of Witness
the
that
See testimony
in this
manufacturing
answer
pieces
of postal
cards
cards.
OCA-T-400
expect
costs
of postal
private
cards
At present,
cost
some 'of the
be reduced.
manufacturing
costs
post
such economies
more lower
No, this
d.
to say that
by postal
printed
:stream I would
mail
seems fair
the
is
(Tr.
confirmed
2/251)
and
4/1119).
to d.
why private
cards,
it.
which
postcard
is not
users
given
would
value
to postal
ANSWERSOF OCA WITNESS ROGER SHERMAN
TO INTERROGATORIESUSPS/OCA-T100-1-18
CONTIIKJATION OF ANSWERTO USPS/OCA-TlOO-11:
g-
they
The stationery
pay for
priority
certain.
it.
mail
is not
I suppose
users
I do not
stationery
in postal
in express
mail).
and for
to postal
the same is
express
see any benefit
cards
free
mail
true
card
of envelopes
users,
to postcard
(or the envelopes
users,
but
since
for
I am not
users
in priority
from the
mail
or
ANSWERSOF OCA WITNESS ROGERSHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-1-18
Please
to page 5 line
15
USPS/OCA-TlOO-12.
refer
testimony.
Please define the term "welfare
considerations."
a.
How
do
welfare
considerations
relate
to the pr'icing
b.
of the Postal Reorganization
Act?
A.
a.
Welfare
to do with
the well
consumers
being
the difference
surplus,
The requirement
that
(criterion
1) is
to protect
the value
of mail
services
further
consumer
Postal
with
Service
3) furthers
changing
(criterion
Considering
the
4) is clearly
available
of consumers.
rates
(criterion
consumers
structure
that
of rate
priced
increases
attending
alternative
Having
2) will
enabling
It
costs.
is
the
consistent
from representations
services
has some services
effect
being
are derived
because
from any rate
even but
Considering
letters
welfare
are
and equitable
at the same time
that
represented
be
what consumers
be fair
institutional
Ensuring
welfare.
rates
influence
which
might
of
pay.
the well
while
to cover
Ramsey prices,
consumer
break
welfare
having
and more specifically
between
actually
your
criteria
mean considerations
Consumer welfare
to pay and what they
b.
would
of the public
and producers.
by consumer
willing
considerations
of
cover
costs
of
(criterion
can always
be benefitted
allows
enterprise
below
the
their
on the
to public
by
to
costs.
general
public
welfare.
means of sending
(and receiving
ANSWERSOF OCA WITNESS ROGERSHERMAN
TO INTERROGATORIESUSPS/OCA-T100-1-18
CONTINUATION OF ANSWER TO USPS/OCA-TlOO-12:
(criterion
5) is respecting
may be in and thereby
which
serve
welfare,
services.
like
The degree
taking
cost
the positions
promoting
call
for
into
account;
Simplicity
(criterion
consumers
of dealing
with
so reflects
concern
welfare.
values
explicit
of preparation
mailers.
and scientific
their
for
it
(criterion
welfare.
of mail
is required
rate
welfare.
constuners
Ramsey prices,
attention
7) acknowledges
complex
public
that
to alternative
(criterion
for
fairness
the
and service
Educational,
8) obviously
6) is
relate
cost
to
to
schedules
cultural,
to public
and
ANSWERSOF OCA WITNESS ROGERSHERMAN
TO INTERROGATORIESUSPS/OCA-T100-1-18
USPS/OCA-TlOO-13.
Please refer
to page 27 lines
1-19 of your
testimony.
a.
Other than circumstances
in which post office
box service
is
the only available
means of postal
delivery,
isn't
it true
that poit office
box customers may receive
"dual"
delivery,
i.e.,
at their
residence
or place of business and at the post
office
box?
for dual
b.
If post office
box customers are in fact eligible
delivery
and elect to receive
mail at both their
residence
(or
and their
post office
box, doesn't
pIlace of business)
that
hiave the effect
of eliminating,
or at least
reducing,
the
delivery
savings you claim attend the provision
Iof post office
box service?
A.
a..
of mail
office
"dual"
Yes,
delivered
box is
b.
delivery
to an address
also
receiving
I do not
claim
proviaion
of post
office
a savings
and if
so they
savings
delivery.
exist,
is possible,
they
would
would
although
probably
the
be lower
volume
if
a post
some of the mail.
delivery
cost
box service;
would
be worth
probably
savings
attend
the
I suggest
that:
there
identifying.
be lower
when there
If
may be
such
is
"dual"
ANSWERSOF OCA WITNESS ROGERSHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-l-18
USPS/OCA-TlOO-14.
Please refer
to page 6 line 15 through page 7
line 13 of your testimony.
a.
Please identify
all the products
for which you (claim detailed
c:ost information
is needed to perform
pricing
analysis
and
draw comparisons to competitive
products.
b.
For each product
identified
in (a), describe
in detail
the
cost information
that you claim has not been provided
in the
record in this proceeding
or Docket No. R94-1.
A.
a.
serviczes
service
As my testimony
for
It
would
affects
carried.
If
the proposal
into
the
testimony
information
be useful
cost
page ll),
two
are registry
all
by value
groups
would
pricing
cost
declarations
be in order..
would
is
are small,
18 to page 18,
information
proposal.
class
of value
clearly
page 17, line
how unambiguous
or how declared
in cases where no insurance
differences
category
mail
is wanting
to know whether
cost
to combine
(OCA-T-100,
the ceirtified
COCA-T-100,
mail.
registry
csne pricing
explain
cost
and certified
l.2.
value
which
indicates
aid
then
together
In my
line
20) I
in evaluating
ANSWERSOF OCA WITNESS ROGER SHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-l-19
USPS/OCA-TlOO-15.
Please refer to your testimony
at page 7 line 21
to page 8 line 1.
Please explain your definition
of interrelatedness
in economic
a.
terms.
b.
Is it your testimony
that when one product
is interrelated
each can be a substitute
of the other?
with another product,
For each product
for which you claim information
concerning
C.
its interrelationship
with another product
is lacking,
please
which
it
is
product,
products
with
identify
the
all
interrelated
(as that concept is defined in part (a)), and the
information
that you claim is lacking,
either
in this record
or Docket No. R94-1.
A.
a.
change
An interrelationship
in the price
of another
b.
of one service
service.
demand between
No.
substitutes
exists
In economic
When products
are interrelated
in position
exist
that
is
in preparation
about
a change
it
for
a
demanded
of
they
can be either
now.
cards,
a major
service
that
mail,
case.
In connection
with
where
case,
However,
in the price
information
on
I had no responsibility
for
this
private
of this
quantity
if
zero.
lacking.
the demand for
Class
services
cross-elasticities
to show where
them and searching
me to speculate
only
the
are not
I am not
identifying
expect
terms,
the
such services
demand interrelationships
might
affects
mail
or complements.
c:.
for
between
so it
it
of postal
but
is not
post
and whether
also
is difficult
for
is reasonable
cards
will
to
affect
the demand for
included
office
they
within
box service,
not
First-
the
scope
it
is
ANSWERSOF OCA WITNESS ROGERSHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-l-18
CONTINUATION OF ANSWERTO USPS/OCA-TlOO-15:
claimed
by Postal
that
since
for
them is
pick
this
would
case.
businesses
up mail
Express
Service
Mail,
desirable,
causes
Priority
interrelationship
involve
services
Witness
use the
because
Needham USPS-T-7,
larger
boxes,
making
their
coming
to post
them to use other
mail
Mail
and Standard
with
other
that
are not within
mail
services,
Mail.
services
the
page 20)
rates
lower
offices
such as
No evidence
is
to
of
s:hown, but
scope of this
it
ANSWERSOF OCA WITNESS ROGER SHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-l-18
USPS/OCA-TlOO-16.
Please refer to your testimony
at page 31, lines
17-18, and page 32, lines
Do
you
believe
that the higher
l-4.
prices
for CMRA boxes are based only on higher costs,
compared to
the Postal
Service's
costs?
If not,
what other
factors
might
underlie
the CMRA prices?
A.
The higher
post
office
addition
prices
for
CMRA boxes
boxes may be due in part
to higher
due to more services
cost.
being
for
to other
The difference
provided
than
Postal
factors,
in prices
by the CMRA's.
Service
in
charged
may be
ANSWERSOF OCA WITNESS ROGERSHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-l-18
USPS/OCA-TlOO-17.
Please refer to Exhibit
OCA-101.
Please provide
copies of the following
articles:
Roger iSherman h Robert Tollison,
"Public
Policy Toward Oligopoly,"
Antitrust
Law and Economics Review, Vol. 4 (Summer 1971).
Sherman, Roger, "Entry Barriers
and the Growth of Firms,"
Southern
Economic Journal,
Vol. 38, (October 1971).
Sherman, Roger, "The Rate-of-Return
Regulated Public Utility
Firm
is Schizophrenic,"
Applied Economics, Vol. 4 (March 1972).
Sherman, Roger & George, Anthony, "Second-Best
Pricing
for the U.S.
Postal Service"
Southern Economic Journal,
Vol. 45 (January
1979).
Inefficiency
under Profit
Regulation,"
Sherman, Roger, "Pricing
Southern Economic Journal,
Vol. 48 (October 1981).
Sherman, Roger, "Pricing
Behavior of the Budget Constrained
Public
Enterprise,"
Journal of Economic Behavior and Organization,
Vol. 4 (1983).
Design for Monopoly Regulation,"
Sherman, Roger, "Institutional
European Journal of Political
Economy, Vol. 5 (December 1989).
Waste in the Rate-of-Return
Regulated
Sherman, Roger, "Capital
Firm," Journal of Regulatory
Economics, Vol. 4, (December
1992).
From Legal Unrealism to
Sherman, Roger, "Monopoly Regulation:
Unreal Legalism and Beyond," Review of Industrial
Organization.
Journal of
Sherman, Roger, "Should Ramsey-Price Markups Differ?"
Regulatory
Economics.
A.
See OCA-LR-4.
ANSWERSOF OCA WITNESS ROGERSHERMAN
TO INTERROGATORIESUSPS/OCA-TlOO-l-18
USPS/OCA-TlOO-18.
testimony.
Please
A.
"Socially
society's
optimal
standpoint.
to page 8 line
optimal pricing."
Please
refer
define "socially
pricing"
is pricing
See answer
that
20
of
is desirable
to USPS/OCA-TlOO-l(a)
above.
your
from
CERTIFICATE OF SERVICE
I hereby
certify
document upon all
accordance
with
that
I have this
participants
section
3.B(3)
of record
date
served
in this
of the special
proceeding
rules
EM?4ETTRAND COSTICH
Attorney
Washington,
D.C.
October 21, 1996
20268-0001
the foregoing
in
of practice.