We study upstream horizontal mergers and their potential efficiency gains. We show that an upstream horizontal merger can give rise to two efficiency-enhancing effects when firms trade through two-part tariffs. It increases R&D investments and decreases wholesale prices when downstream...

We analyze the competitive effects of backward vertical integration when firms exert market power upstream and compete à la Cournot downstream. Contrasting with previous literature, a small degree of vertical integration is always procompetitive because efficiency gains dominate foreclosure...