Question

In the picture below, which of the two supply chains suffer(s) from double marginalization? Integrated supply chain Distributed supply chain (mfg is also the retailer) (mfg, M sells to the retailer, R) 9 = 1000-P KAJ-22.500 (C) 4-45.000 1000 1000 R-850 A-700 pe 700 (p-C) 90.000 Sum= 67,500 C400 C400 9-1000- Price soud Quantity 1000 O q 300 1000 150 Quantity Both supply chains. Neither the integrated supply chain (left frame) nor the distributed supply chain (right frame). The integrated supply chain (the graph on the left). The distributed supply chain (the graph on the right).

Answer 1

Ans - The distributed supply chain (the graph on the right)

Double marginalization occurs when two firms in different verticals of a same industry use their respective market power to mark up the prices. As a result, the entire industry and customers get impacted. In case of distributed supply chain, manufacturer M as well as retailer R has put the mark up on the price.