When marginalization one designates doubles the double Preisaufschlag, which is to be found at goods, which are manufactured in a multi-level production process, about raw material extraction, subsequent treatment and sales. If the different production stages are operated by different companies and to have this market power, for example in form of a monopoly, then it comes on each stage to a renewed Preisaufschlag. This double Preisaufschlag has the consequence that the final product has a higher price, than this would be the case, if an individual company had control of the entire production process. A chain of monopolies causes thus prices, which are still higher than the Monopolpreis of a vertically integrated company.

A cause and effect

A cause of the price increase by doubles marginalization is the circumstance that the second monopolist considers the negative effect of a price increase with the price choice only on the own profit, which is due to a reduction of the quantity sold. The negative on the first monopolists is not considered, because an increase of the total price provides over the decrease in demand also for a lowering of the profit of the first company.

This has the consequence that double is to be evaluated marginalization under welfare criteria as clearly negative. The double Preisaufschlag leads compared with a simple monopoly to the fact that the total profit of the companies is smaller, which must pay consumer a higher price and a smaller quantity is consumed. All social groups are thus strictly more badly posed.

Problem solutions

There are numerous mechanisms to prevent or at least limit doubles marginalization. Among these among other things the following rank.

• Verktikale integration: A fusion of the companies concerned ensures for the fact that the price setting from joint view of the companies is selected. Equivalent one for this is a trust of the companies concerned.
• Franchise fee: The first company second sells the right to sell their products by an a mark price, the so-called Franchise fee, which of the refugee quantity is independent. Additionally a cost per sold piece is computed. If this unit price is selected in such a way the fact that it corresponds exactly to the neighbouring costs of the production is optimal it for the second company to select the Monopolpreis for the final product. The first company makes profits here only over the Franchise fee.
• Nonlinear price setting: Here the first company requires not an mix-independent price per unit, but makes the unit price dependent on the sold total quantity. If the discount pattern is optimally selected, it corresponds exactly the
• Application of fixed prices of the second hand (resale price maintenance): Here the first company second prescribes the selling price for the final product.
• Competition: If a manufacturer sells its products over competitive dealers, the competition under these provides for a lowering of the second Preisaufschlages.

One notes that above mechanisms solve only the problem of the doubles marginalization. Of view of the total welfare however the problem of the monopoly price setting remains consisting. The moreover it is pointed out that some mechanisms, about a union or a trust of the companies, are to be judged with horizontal firm relations competition-politically critically. In the vertical relations discussed here they have however the advantage to prevent the double Preisaufschlag.

Literature

The phenomenon of the double Preisaufschlags became already in 19. Century of the French mathematician Augustin Cournot (1838) antizipiert. A first complete analysis is in Joseph Spengler (1950). Massimo Motta (2004) contains an understandable discussion of the topic.

• Cournot, Augustin (1838). Recherches sur les Principes de la of the Richesses, English edition: Research into the Mathematical Principles OF the Theory OF Wealth, Edited by N. Bacon, New York: MacMillan, 1897

• Spengler, Joseph J. (1950). "“Vertically integration and Antitrust Policy"”, journal OF Political Economy 58, 347-352

• Motta, Masimo (2004). Competition Policy, Cambridge University press

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