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lerner Tagged Articles
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Double Marginalization and the Decentralized Supply Chain Revisited
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| Without a doubt, the concept of double marginalization and the resultant issues associated with understanding and addressing its impact represents one of the more complex elements of an organization’s supply chain practice.
As the point of convergence of multiple stakeholder interests and the seemingly disparate (some would say contradictory) strategies that define today’s partinioned enterprises, the intent of the article when it was first published was to create an awareness of a concept that up until that point was not widely recognized, let alone understood by the majority of purchasing professionals.
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Other lerner Related Articles
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Double Marginalization and the Decentralized Supply Chain
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| Double marginalization is defined as the “exercise of market power at successive vertical layers in a supply chain.” Dating back to Lerner (1934) the problem that arises as a result of double marginalization is tied to an impetus to mark up the product’s price above marginal cost. According to a 2005 Caltech paper (Vertical Integration of Successive Monopolists: A Classroom Experiment) the sequence of mark-ups “leads to a higher retail price and lower combined profit for the supply chain than would arise if the firms were vertically integrated.” |
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