Musings on vertical integration

Studies the theory of vertical integration, and examines the benefits both to the firm and to society. Looks at the reasons which might precipitate an increase in integration: technical economies of scope; economics of internal production resulting from market failure; and pursuit of aggrandizement or monopoly power. Presents a parity pricing formula which proves that parity pricing is necessary for economic efficiency. Concludes that no firm can be described as totally unintegrated; rather it is a matter of optimal degree.