This paper develops an equilibrium model of vertical mergers. We show that competition on an upstream market between integrated firms only is less intense than in the presence of unintegrated upstream firms. Indeed, when an integrated firm supplies the upstream market, it becomes a soft...

We propose a model of two-tier competition between vertically integrated firms and unintegrated downstream firms. We show that, even when integrated firms compete in prices to offer a homogeneous input, the Bertrand result may not obtain, and the input may be priced above marginal cost in...