Price Discrimination and Vertical Control: A Note

The analysis extends beyond the standard case of the monopolist who integrates in order to isolate some of his customers from arbitrage in the monopolized good so that he can discriminate against them. It examines the exploitation of factors employed by, and the customers of, the monopolist's customers. By vertical integration the monopolist may utilize barriers to arbitrage that would otherwise be unexploited because the market is competitive. Sometimes looser forms of vertical control, for example, tying arrangements, can be employed, and in some circumstances it is possible to extract surpluses from parties with whom the monopolist does not trade.