Abstract
In the traditional view, prices are subsidy-free as long as they are no greater than stand-alone cost and no less than incremental cost. This assumes that only specialized firms provide rivalry. However, diverse firms also provide rivalry called multilateral rivalry. This paper explores how multilateral rivalry that results from economies of scope affects subsidy-free prices. This rivalry shrinks the range of subsidy-free prices—the new upper bound is less than stand-alone cost and the new lower bound is greater than incremental cost. In effect, this rivalry forces a sharing of economies of scope among products.
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