Some Aspect of Price Discrimination Under Vertical Integration

Abstract

An upstream monopolist has an incentive to integrate foward with downstream monopolists while practicing implicit third-degree price discrimination. The effect is to eradicate the pricing inefficiency normally associated with successive monopolies. The subject integration may lead to Pareto improvement depending on the type of firm (or set) that is merged with the upstream monopolist. This paper also demonstrates that integration of a firm with spatially dispersed downstream monopolists may lead to Pareto improvement under general demand conditions.