This paper analyzes the conditions under which vertical mergers can lead to market foreclosure and the effects of vertical integration on competition in upstream and downstream markets. The authors, Oliver Hart and Jean Tirole, examine three variants of vertical integration: ex-post monopolization, scarce needs, and scarce supplies. They argue that vertical integration can lead to market foreclosure by allowing firms to restrict output and raise prices, particularly when firms have significant cost advantages or are large relative to non-merging firms. The paper also considers the costs and benefits of vertical integration, including the potential for efficiency gains and the risk of reduced competition. The authors conclude that vertical mergers involving efficient or large firms should be subject to particular scrutiny by anti-trust authorities, as they may lead to significant anti-competitive effects. The paper also discusses the role of profit-sharing and residual control rights in vertical integration and the potential for bandwagon effects, where firms merge to avoid competition or to gain market power. The authors use a theoretical model to analyze the effects of vertical integration on market outcomes and provide insights into the implications of vertical mergers for competition and welfare.This paper analyzes the conditions under which vertical mergers can lead to market foreclosure and the effects of vertical integration on competition in upstream and downstream markets. The authors, Oliver Hart and Jean Tirole, examine three variants of vertical integration: ex-post monopolization, scarce needs, and scarce supplies. They argue that vertical integration can lead to market foreclosure by allowing firms to restrict output and raise prices, particularly when firms have significant cost advantages or are large relative to non-merging firms. The paper also considers the costs and benefits of vertical integration, including the potential for efficiency gains and the risk of reduced competition. The authors conclude that vertical mergers involving efficient or large firms should be subject to particular scrutiny by anti-trust authorities, as they may lead to significant anti-competitive effects. The paper also discusses the role of profit-sharing and residual control rights in vertical integration and the potential for bandwagon effects, where firms merge to avoid competition or to gain market power. The authors use a theoretical model to analyze the effects of vertical integration on market outcomes and provide insights into the implications of vertical mergers for competition and welfare.