Vertical integration can eliminate double marginalization.

Question

Quizplus · Accepted Answer

Vertical integration allows for firms to control multiple stages of production and distribution, which can lead to the elimination of double marginalization. Double marginalization occurs when each stage of production, such as manufacturing and retail, adds a markup to the final price, leading to higher prices for consumers. By integrating these stages, the markup can be reduced or eliminated, resulting in lower prices for consumers and potentially higher profits for the firm.

Vertical Integration Can Eliminate Double Marginalization