To Circumvent the Problem of Double Marginalization

question 4

Multiple Choice

To circumvent the problem of double marginalization:

• A) transfer prices must be set that maximize the overall value of the firm rather than the profits of the upstream division.
• B) firms should engage in two-part pricing, unless it is possible to engage in either first- or second-degree price discrimination.
• C) firms should vertically integrate.
• D) None of the answers are correct.

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