Which of the following causes finished goods prices not to maximize the joint profits of a manufacturer and its supplier?
A)Inefficient asset specificity
B)Lack of coordinated scope economies
C)Incomplete contracting
D)Double marginalization
E)None of the above

Question

Quizplus · Accepted Answer

Double marginalization can occur when both the manufacturer and the supplier mark up their prices, resulting in higher prices for the finished goods and reducing the overall profits of the two parties. This is because the higher price results in lower demand, leading to lower profits for both parties. The other options listed (inefficient asset specificity, lack of coordinated scope economies, and incomplete contracting) can also affect joint profits, but they do not specifically lead to double marginalization.

Which of the Following Causes Finished Goods Prices Not to Maximize