Relative prices and electronic substitution: Changes in household-level demand for postal delivery services from 1986 to 2004

Seung Hyun Hong, Frank A. Wolak

Research output: Contribution to journalArticlepeer-review


This paper quantifies the extent to which the shift in the aggregate household-level demand for postal delivery services can be attributed to the appearance of alternative modes of communication versus the concomitant rise in postal prices. We find that both recent postal price increases and the penetration of personal computer technology among US households led to similar reductions in postal expenditure. We further find that a 5% postal price increase, such as the one introduced in January 2006 reduces revenue collected from US households by $215 million and imposes an aggregate welfare loss on US households of $333 million.

Original languageEnglish (US)
Pages (from-to)226-242
Number of pages17
JournalJournal of Econometrics
Issue number1-2
StatePublished - Jul 2008


  • Electronic substitution
  • Relative prices
  • Simulated likelihood
  • Two-sample maximum likelihood
  • United States Postal Service

ASJC Scopus subject areas

  • Economics and Econometrics

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