A general theoretical and empirical framework is developed for assessing the potential of a vertically integrated firm to foreclose downstream competitors. Using this framework a policymaker may also evaluate the empirical welfare effects from a vertically integrated firm raising rivals' costs....

We study the effects of a vertical merger in a setting with a single upstream supplier of a critical input and two downstream customers which compete with each other. Initially, the upstream supplier first announces prices, then the two downstream customers announce their retail prices. We find...