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This clearly reduces the strategic motives for cross-subsidization by eliminating traditional predation.
This would also make deliberate cross-subsidization relevant to private multiservice firms with significant market power in some markets.
In this case, cross-subsidization is merely a means for financing predatory pricing.
Predatory and non-profit motivated cross-subsidization, although based on a benevolent motive, will of course still be damaging to competitors.
Even so, there might still be welfare effects from cross-subsidization due to its efficiency as a funding mechanism.
These organizations are able to get high-quality labour at low wages, not because their low wages select workers with self-sacrificing preferences, but because of cross-subsidization.
Instead, the public firm would continue its low price policy and finance the loss by continued cross-subsidization.
The observed relationship therefore provides evidence of cross-subsidization between different risk categories.
In the private sector, cross-subsidization occurs within firms that allow some of their services to be sold at less than incremental cost.
Based on the three types of cross-subsidy definitions, we developed a framework for classifying cases of cross-subsidization according to underlying motivation and effect on competition.
However, implicit cross-subsidization cannot be financially sustainable in a competitive insurance market.
Indeed, they result in a cross-subsidization of high-risk, high-income individuals by low-risk, low-income individuals.
In other cases, the cause of inadvertent cross-subsidization might be more fundamental, as in multiservice firms with high sunk costs and low variable costs such as telecommunications.
In conclusion, this most restrictive type of cross-subsidy definition limits the reasons for cross-subsidization to either be an information problem or a non-profit motive as discussed earlier.
Most definitions of cross-subsidization are more restrictive, however, in that they implicitly or explicitly include revenues and require that losses on one service are funded through profits from another.