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CROSS‐SUBSIDISATION OF RURAL AREAS VIA UTILITY PRICING POLICIES*

CROSS‐SUBSIDISATION OF RURAL AREAS VIA UTILITY PRICING POLICIES* 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Australian Journal of Agricultural Resource Economics Wiley

CROSS‐SUBSIDISATION OF RURAL AREAS VIA UTILITY PRICING POLICIES*

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Publisher
Wiley
Copyright
Copyright © 1981 Wiley Subscription Services, Inc., A Wiley Company
ISSN
1364-985X
eISSN
1467-8489
DOI
10.1111/j.1467-8489.1981.tb00399.x
Publisher site
See Article on Publisher Site

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.

Journal

The Australian Journal of Agricultural Resource EconomicsWiley

Published: Dec 1, 1981

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