Explain Why Dealing with a Single Monopolist May Be Better

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The Answer is A single monopolist who controls both parts of a vertically related process (i.e. MLB team owner and television network owner) has no incentive to charge herself more than the marginal cost of production of the first stage. Hence consumers pay for a monopoly markup only once. On the other hand when dealing with two vertically related monopolists, the first monopolist charges the second monopoly a price (which is greater than the first monopolists marginal cost). The second monopolist takes that higher price as her marginal cost and charges a monopoly price that is greater than that marginal cost. Thus consumers pay a higher price when dealing with two vertically related monopolists rather than a single monopolist who controls both parts of the production process.

Explain Why Dealing with a Single Monopolist May Be Better

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