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Structure Regulation, Price Structure, Cross-Subsidization And Marginal Cost Of Public Funds

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  • MING CHUNG CHANG
  • HSIAO-PING PENG
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    Abstract

    In this paper we study the social desirability of the structure regulation which transforms a single multi-product monopoly into an oligopoly where the industry produces differentiated complementary goods. In particular, we pay special attention to the cross-subsidization which will be eliminated by the structure regulation. It is established that if horizontal externalities between the goods are not too strong, then the monopoly has a socially optimal price structure. In contrast, the oligopoly always distorts the price structure. We also demonstrate that the monopoly will cross-subsidize a product if and only if this product has a relatively low absolute advantage. Copyright � 2009 The Authors. Journal compilation � 2009 Blackwell Publishing Ltd and The University of Manchester.

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    Bibliographic Info

    Article provided by University of Manchester in its journal The Manchester School.

    Volume (Year): 77 (2009)
    Issue (Month): 6 (December)
    Pages: 675-698

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    Handle: RePEc:bla:manchs:v:77:y:2009:i:6:p:675-698

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    Cited by:
    1. Ming Chang & Hsiao-Ping Peng, 2012. "Laffer effect, gross substitution, marginal cost of public funds and the level property of public good provision," International Tax and Public Finance, Springer, vol. 19(5), pages 650-659, October.

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