Short-Run Costs and Postal Pricing

As a follow-up to its paper, A Primer on Postal Costing Issues, the OIG asked Professor Michael D. Bradley of the Economics Department of George Washington University, an expert in postal economics, to co-author a paper on pricing and short-run costs. This paper defines what is meant by short-run and long-run costs, explores the issues associated with using short-run costs when developing prices, outlines what information is needed to measure short-run costs, and develops a multistep algorithm for estimating short-run costs that is consistent with the existing Postal Service cost system.