Recently we wrote that the arguments put forth by The Donald and others that the US Postal Service (USPS) was giving Amazon a subsidy were unconvincing because fixed cost allocations are arbitrary.
Sidebar One: We use first person plural, Sidebars and don’t cite ourselves. We don’t have that many posts that you can’t look and check. That is how we roll. End Sidebar One.
We have changed our mind and concluded that The Donald and others are not just unconvincing but they are wrong. In looking at the evidence we see that the USPS has excess capacity because there is less first class mail. The USPS has capacity and Amazon has packages. The USPS is using Amazon to support first class mail rather than the other way around. We should salute a not-for-profit organization for making such astute business decisions.
Sidebar Two: An interesting question is what is the extent of the USPS’s fixed costs. Do they, or realistically, to what extent should labor costs be included. There is a nice research opportunity there. End Sidebar Two.
There are reasons to be upset with the USPS. The Amazon deal is not one of them.