Do Technology Progress and Service Differentiation Bring Efficiency and Social Welfare in the Process of Network Service Enterprise´s Marketization: Experience from China Post

This paper finds that, in the process of marketization, network-type service monopoly enterprises tends to pursue their profit goal through product and service differentiation, by lowering the quality of universal service and increasing the price and quality of high-paid services, which usually expel customer from universal service to more expensive service, hence reduce the social welfare. After establishing a market strategy model of service enterprise in transition, this paper investigates the overall delivery time of ordinary mail, registered mail and express mail among eight cities, the investigation showed that even though the market presence, equipment, technology for China Post upgraded greatly, but the delivery time for all these mails are delayed, especially for the ordinary mail which belongs to the scope of universal service. The case of China Post shows that during the marketization transition, technology progress and service differentiation do not increase efficiency and quality of the service, nor increase social welfare. Finally, we proposed that market entry threshold for network-type service industry should be relaxed to encourage competition during marketization.