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Cross-Subsidy Analysis With More Than Two Services

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  • Gerald R. Faulhaber

Abstract

Thirty years have passed since the publication of “Cross-Subsidization: Pricing in Public Enterprises.” The article rigorously defined cross-subsidization and is now a standard citation of regulators and scholars addressing the pricing of regulated multiproduct firms. The incremental cost test and the stand-alone cost test, however, have often been misunderstood and misapplied. This article answers the most common questions that have arisen in the application of these tests for cross-subsidization and corrects the most common errors that have been committed in their application.

Suggested Citation

  • Gerald R. Faulhaber, 2005. "Cross-Subsidy Analysis With More Than Two Services," Journal of Competition Law and Economics, Oxford University Press, vol. 1(3), pages 441-448.
    • Handle: RePEc:oup:jcomle:v:1:y:2005:i:3:p:441-448.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhi014
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    Cited by:

    1. Zhijun Chen & Patrick Rey, 2019. "Competitive cross‐subsidization," RAND Journal of Economics, RAND Corporation, vol. 50(3), pages 645-665, September.
    2. Dong Gu Choi & Michael K. Lim & Karthik Murali & Valerie M. Thomas, 2020. "Why Have Voluntary Time‐of‐Use Tariffs Fallen Short in the Residential Sector?," Production and Operations Management, Production and Operations Management Society, vol. 29(3), pages 617-642, March.
    3. Russell Pittman, 2010. "Against the stand-alone-cost test in U.S. freight rail regulation," Journal of Regulatory Economics, Springer, vol. 38(3), pages 313-326, December.
    4. Fernandez, Linda & Dumas, Christopher F., 2009. "Cross-media pollution and fuels -- Can we avoid future MTBEs?," Energy Economics, Elsevier, vol. 31(3), pages 423-430, May.
    5. Dreze, Jacques & Le Breton, Michel & Savvateev, Alexei & Weber, Shlomo, 2006. "0.19% Subsidy-Free Spatial Pricing," IDEI Working Papers 423, Institut d'Économie Industrielle (IDEI), Toulouse.

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