0 a situation in which profits from one activity are used to pay for another activity that is losing money or making less money:
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.
