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Call in the Carrier Pigeons: Repeatedly raising the price of stamps doesn’t work

April 23, 2024

READ FULL ARTICLE AT » www.baltimoresun.com

It’s hard to keep track of ever-increasing stamp prices. This month, the U.S. Postal Service (USPS) proposed hiking stamp prices in July from 68 cents to 73 cents, a 7.4% increase. In January, USPS hiked the price of first-class Forever stamps from 66 cents to 68 cents. Six months earlier, the agency raised prices from 63 cents to 66 cents. And six months before that, stamp prices increased from 60 cents to 63 cents. Postal leadership claims that these painful pricing changes are necessary to get the USPS back into the black. But, according to a new report by the non-profit postal watchdog “Keep US Posted,” this revenue-raising gambit is sorely misguided. The USPS cannot solve its dire fiscal issues by gouging hard-working taxpayers and consumers.

America’s mail carrier has tried and failed to use the power of mathematics to figure out pricing. For all the variables that go into the USPS’ pricing equations, the agency completely misses the mark on demand elasticity. Postal bureaucrats assume that, even if the agency continues to hike prices, consumers will have no choice but to keep buying stamps at inflated rates. They are wrong. In the age of the World Wide Web (and prison-bound carrier pigeons), switching away from high-priced stamps is easier than the USPS would like to believe. According to Keep US Posted’s report, “under the current process, the USPS proposes new rate increases before the impact of prior increases can be fully realized. USPS demand models, which are used to justify rate increases, have never been tested in this way. USPS stands to lose considerably from miscalculating its customers’ sensitivity to price.” Keep US Posted estimates that these flawed revenue projections cost the USPS $1.8 billion annually, or roughly one-third of the agency’s $6.5 billion net loss for fiscal year 2023.

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