| Abstract: | Thirty years have passed since the publication of "Cross-Subsidization:Pricing in Public Enterprises." The article rigorously definedcross-subsidization and is now a standard citation of regulatorsand scholars addressing the pricing of regulated multiproductfirms. The incremental cost test and the stand-alone cost test,however, have often been misunderstood and misapplied. Thisarticle answers the most common questions that have arisen inthe application of these tests for cross-subsidization and correctsthe most common errors that have been committed in their application. |
