crosssubsidiatie

Crosssubsidiatie is the practice in which revenues or profits from one part of an organization are used to fund another part. It can occur within a single company, across subsidiaries, or between different business lines or geographic regions. The intention is to support less profitable activities, subsidize strategic initiatives, or align financial resources with broader objectives.

The mechanism often involves allocating costs and revenues through internal pricing, transfer pricing, or shared-cost allocations. Internal service charges and cross-charging between units are common tools. In regulated sectors, crosssubsidiatie can be used to finance universal service obligations or to balance pricing across customer groups.

Rationale and uses vary. For some firms it enables strategic investments, risk pooling, or cross-subsidizing new or socially important services that would not be viable on a stand-alone basis. Regulators may tolerate or mandate cross-subsidies to achieve policy goals, such as affordable access, rural service, or social equity. In other cases, crosssubsidiatie is pursued to optimize overall group profitability or to smooth earnings.

Critics warn that crosssubsidiatie can distort competition by masking true costs and profits, hide inefficiencies, and obscure accountability for unit performance. It can reduce transparency and lead to mispricing, cross-subsidization of rivals, or regulatory concerns if subsidies are used to influence market outcomes.

See also: internal pricing, transfer pricing, cross-subsidy.