The One-Third Rule: Learning about the Net Economic Benefit of a Subsidy from a Single Observation

Jorg Schimmelpfennig

Public Choice, 1998, vol. 95, issue 3-4, 34 pages

Abstract: The subsidization of a natural monopoly is justified on welfare-economic grounds if the resulting total economic surplus exceeds total costs. Using rather standard assumptions, a simple check, managing with a minimum of information and, in particular, without virtually any knowledge of the demand curve, is developed which is capable of confirming an existing economic case for subsidization. Copyright 1998 by Kluwer Academic Publishers

Date: 1998
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