Cross-subsidization

Cross-subsidization

When a marketer charges higher prices to a group of consumers in order to subsidise lower prices for another group, it is referred to as cross subsidisation. State enterprises, who have monopoly over certain farm exports are often accused of indulging in cross subsidisation, but these are not determined with certainty due to the lack of transparency. According to some experts, cross subsidisation causes welfare losses. An instance of cross subsidisation would be when banks charge a fee for maintaining a low balance account to these customers.