Abstract
The incremental cost floor is widely accepted among economists and policy makers as the appropriate basis for testing for cross-subsidy and predatory pricing. In recent papers, Lott (1999) and Sappington and Sidak (2002 and 2003) question this approach and argue that it is not appropriate for public enterprises. While these authors do not provide a specific replacement for the incremental cost floor, they do argue that the cost floor should be above incremental costs.
The views expressed in this paper are those of the authors and do not necessarily represent those of the United States Postal Service or any other organization.
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Bradley, M.D., Colvin, J., Perkins, M. (2003). Testing for Anti-Competitive Behavior in Public Enterprises. In: Crew, M.A., Kleindorfer, P.R. (eds) Competitive Transformation of the Postal and Delivery Sector. Topics in Regulatory Economics and Policy Series, vol 46. Springer, Boston, MA. https://doi.org/10.1007/978-1-4419-8915-4_8
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DOI: https://doi.org/10.1007/978-1-4419-8915-4_8
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