Data for the telephone cross-subsidy example
Here is initial data (case 1, BAU) for the two markets in the telephone cross-subsidy analysis to be done in class. The value of `WTA_L` is initially unknown but will be found in the course of the analysis.
Market data:
|
Lines (L) |
Minutes (M) |
Price |
$30 |
$0.25 |
Quantity |
100k |
10M |
Elasticity |
-0.2 |
-1 |
WTA |
TBD
|
$0.10 |
Policy budget:
- The firm is running a balanced budget on the policy: the amount of extra revenue it earns in the M market exactly matches the subsidy it provides in the L market.
- Note that in all cross-subsidy problems this semester, the term "budget" will always refer to the revenue and spending on the cross-subsidy, not to the organization's overall budget.
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Peter J Wilcoxen, The Maxwell School, Syracuse University
Revised 10/04/2023