Asked by Tenzin Tselha Rangzen on Sep 24, 2024

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​Vertical contracts can also be seen as

A) ​An increase in coordination between firms producing complementary goods
B) An increase in competition among firms producing complementary goods
C) An increase in coordination between firms producing substitute goods
D) ​An increase in competition between firms producing substitute goods

Vertical Contracts

Agreements between companies at different stages of the production process, such as manufacturers and retailers.

Complementary Goods

Products or services that are typically consumed together or have a high cross-elasticity of demand, implying that a change in the price of one affects the demand for the other.

Substitute Goods

Products or services that can be used in place of each other, fulfilling the same need or want, thus potentially affecting their demand.

  • Apprehend the consequences of vertical and horizontal integration on earnings and rivalry within the market.
  • Evaluate the impact of vertical and horizontal contracts on the dynamics of the market and pricing strategies.
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TT
Tizah Thompson2 days ago
Final Answer :
A
Explanation :
Vertical contracts involve coordination between firms at different stages of the supply chain, such as between a manufacturer and a distributor or between a franchisor and franchisee. These contracts aim to improve coordination and reduce transaction costs between the upstream and downstream firms. This can lead to more efficient production and distribution, but may also raise concerns about vertical market power and foreclosure of competitors. Therefore, vertical contracts can be seen as an increase in coordination between firms producing complementary goods, as they work together to enhance their mutual interests and capture more value from the market.