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Cross-Subsidisation Of Rural Areas Via Utility Pricing Policies

Author

Listed:
  • Thomson, Norm J.
  • Walsh, Cliff

Abstract

Public utilities which apply roughly uniform prices to all consumers often engage in cross-subsidisation - charging prices which are below cost for consumers in low population density areas but above cost for consumers in high density areas. The distributional and allocative implications of this practice are examined and it is concluded that some cross-subsidisation may be justifiable on welfare grounds even where no externalities exist. There is, however, little empirical evidence released by utilities to enable assessment of the efficiency of their practices. If nothing else, we highlight the need for greater public disclosure of pricing practices by public utilities.

Suggested Citation

  • Thomson, Norm J. & Walsh, Cliff, 1981. "Cross-Subsidisation Of Rural Areas Via Utility Pricing Policies," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 25(3), pages 1-12, December.
    • Handle: RePEc:ags:ajaeau:22316
    DOI: 10.22004/ag.econ.22316
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    References listed on IDEAS

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    1. Arnold Harberger, 1964. "Taxation, Resource Allocation, and Welfare," NBER Chapters, in: The Role of Direct and Indirect Taxes in the Federal Reserve System, pages 25-80, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Kolsen, H.M., 1983. "Effective Rates Of Protection And Hidden Sectoral Transfers By Public Authorities," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 27(2), pages 1-12, August.

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