To Circumvent the Problem of Double Marginalization

question 53

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 statements associated with this question are correct.

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