Question
Question about Double Marginalisation Suppose that market demand isD(p) = 1002p. A downstream monopolistDsets a retail pricepand an upstream monopolistUsets a wholesale pricewpaid by the
Question about Double Marginalisation
Suppose that market demand isD(p) = 1002p. A downstream monopolistDsets a retail pricepand an upstream monopolistUsets a wholesale pricewpaid by the downstream firm. Assume marginal costs of respectivelyCD= 20and CU=10 and fixed costs of FCD=10 and FCU=20.
- What is the price and profits under vertical separation?
- What is the price and firm profit under vertical integration? How does this show the problem of double marginalisation? How might this be resolved?
- What is an optimal wholesale pricewand franchise feeFfrom the per- spective of the upstream firm? How does this resolve double marginalisation?
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Strategic Management And Business Policy Toward Global Sustainability
Authors: Thomas L. Wheelen, J. David Hunger
13th Edition
9780132998079, 132998076, 978-0132153225
