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On the subsidization of local monopolies

Author

Listed:
  • Francois Boldron

    (CORE, Universite Catholique de Louvain)

Abstract

Firms compete in model of horizontal differentiation a la Hotelling. They use two-part tariffs but the market is such that, in equilibrium, it is not fully covered (firms are then local monopolies). The question we adressed in this paper is to determine what kind of subsidies are the best instruments to increase the coverage at the lowets cost. This paper shows first that an ad valorem subsidy on the usage price is a less costly instrument to increase the coverage than a per unit subsidy.

Suggested Citation

  • Francois Boldron, 2002. "On the subsidization of local monopolies," Economics Bulletin, AccessEcon, vol. 8(3), pages 1-10.
    • Handle: RePEc:ebl:ecbull:eb-02h20002
    as

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    References listed on IDEAS

    as
    1. Kowalczyk, Carsten & Skeath, Susan E., 1994. "Pareto ranking optimal tariffs under foreign monopoly," Economics Letters, Elsevier, vol. 45(3), pages 355-359.
    2. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    3. Francis K. Cheung, 1998. "Excise Tax on a Non-Uniform Pricing Monopoly: Ad Valorem and Unit Taxes Compared," Canadian Journal of Economics, Canadian Economics Association, vol. 31(5), pages 1192-1203, November.
    4. François Boldron & Cyril Hariton, 2003. "Access charge and imperfect competition," Recherches économiques de Louvain, De Boeck Université, vol. 69(3), pages 319-340.
    5. D. B. Suits & R. A. Musgrave, 1953. "Ad Valorem and Unit Taxes Compared," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 67(4), pages 598-604.
    6. Skeath, Susan E. & Trandel, Gregory A., 1994. "A Pareto comparison of ad valorem and unit taxes in noncompetitive environments," Journal of Public Economics, Elsevier, vol. 53(1), pages 53-71, January.
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    More about this item

    Keywords

    Commodity taxation;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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