The Decision For And Against Privatization Of Public Enterprises

1180 Words Sep 9th, 2015 5 Pages
INTRODUCTION
As most consumers assume, typical product pricing relies on the basic rules of supply and demand. But you may sometimes pay more or less for a product because the company that produces it has implemented different, highly strategic pricing tactics. One of these tactics is called product-cost cross-subsidization. Through cross-subsidization, the government is able to harmonize the divergent socio-economic groups in society in providing their basic needs. This paper seeks to explore the consequences of cross-subsidization. The argument for and against privatization of public enterprises is brought to the fore as the paper examines the effect of equity and efficiency on national social security systems.

CROSS-SUBSIDIZATION
This is a situation where the profits from one activity are used in paying for another activity that is losing money or bring less revenue. Product-cost cross-subsidization is the strategy of pricing a product above its market value to subsidize the loss of pricing a different product below its market value (Price, 2015). In order to cross-subsidize your products, you’ll need to have a good idea of how the product should be priced prior to cross-subsidization. While there is a plethora of pricing strategies that businesses employ, your pricing will depend on the goals of your business and the market. Because your profits will need to cover all of your expenses, your pricing will need to reflect your product cost, operating expenses, rent, site…
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