On the subsidization of local monopolies

Francois Boldron ()
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Francois Boldron: CORE, Universite Catholique de Louvain

Economics Bulletin, 2002, vol. 8, issue 3, 1-10

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.

Keywords: Commodity; taxation (search for similar items in EconPapers)
JEL-codes: H2 (search for similar items in EconPapers)
Date: 2002-09-04
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