Suppose the herbicide manufacturer can vertically integrate

Assignment Help Business Economics

Reference no: EM13984056

By itself, the upstream manufacturer cannot implement a price discrimination scheme against downstream consumers because downstream retailers can defeat it. To see this, suppose that home gardeners and farmers both use the same herbicide. Home gardeners are willing to pay $5 for a one-liter spray bottle ($5 per liter), whereas farmers are willing to pay $600 for a 200-liter barrel ($3 per liter).

If the manufacturer tries to price discriminate (by pricing at $5 per liter to home retailers and $3 per liter to farm retailers), the farm retailers could buy herbicide in 200-liter barrels, put it in a small spray bottles, and sell it to home gardeners. By vertically integrating into retail operations, the manufacturer can prevent this kind of arbitrage. Note that the manufacturer has to integrate only into low-price retailing to accomplish this.

Question: Suppose the herbicide manufacturer can vertically integrate only into home gardening retailing. Would this allow the manufacturer to price discriminate?

Reference no: EM13984056

Questions Cloud

European central bank sets monetary policy for the eurozone : Greece is part of the “Eurozone” – 16 countries that each use the euro (€) as its currency. The European Central Bank (ECB) sets monetary policy for the Eurozone. The austerity measures described above will increase Greek unemployment. Explain why? I..

Debt crisis by selling european financial assets : Wealth holders around the world reacted to the Greek Debt Crisis by selling European financial assets and buying U.S. financial assets. Explain why their action changed the exchange rate between euros and dollars. Did their action strengthen or weake..

Fiscal policies-economy to both internal-external balances : Using the II-XX framework below, show using a figure that fiscal policies by themselves cannot bring the economy to both internal and external balances. Do start with an economy at Point 2 (you will have to address devaluation). A close to complete a..

Would such an agreement be an equilibrium : To Vote or Not to Vote: Mr. and Mrs. Ward typically vote oppositely in elections and so their votes “cancel each other out.” They each gain two units of utility from a vote for their positions (and lose two units of utility from a vote against their ..

Suppose the herbicide manufacturer can vertically integrate : By itself, the upstream manufacturer cannot implement a price discrimination scheme against downstream consumers because downstream retailers can defeat it. To see this, suppose that home gardeners and farmers both use the same herbicide. Suppose the..

Made the need for effective safeguards more urgent : Discuss. “The internationalization of banking has weakened national safeguards against banking collapse, but at the same time it has made the need for effective safeguards more urgent.”

Technology contributes to the experience of workplace stress : What are some of the ways in which evolving technology contributes to the experience of workplace stress? What are some intervention that employee and employers might attempt in order to avoid or mange the stress associated with technology?

Distribution of consumption as a fairness concern : Traditionally we look at the distribution of consumption as a fairness concern, not an efficiency concern. Why is that the case? Is there a perspective from which income distribution looks like a public good?

Non-excludable in theory : What does it mean for a good to be non-excludable in theory one may worry that such a problem could completely shut down private markets. How did we deal with that in designing a private environment for the public goods case so that this doesn't happ..

User Account

All Pages