er that the cost of refining ore into ingots is $40, that the cost of fabricating the ingot into pipe is $35, and that the monopoly price for the final good is $100. If the monopolist were to vertically integrate into fabrication, it could charge $100 for the final good and thereby earn a profit of $25 per unit (i.e., $100 - $40 - $35). The monopolist need not vertically integrate to capture this profit, however. All it needs to do is price the ingot at $65, which would allow it to earn the same profit of $25 per unit (i.e., $65 - $40). Because the firms fabricating the ingot into pipe face competition, they will simply set their markup equal to their costs. This results in the price of the final good also being set at its profit-maximizing price of $100 (i.e., $65 + $35). Thus, under these circumstances, the monopolist gains nothing by vertically integrating into fabrication. All it needs to do to capture all of the available profit is to price the input SO that the final good is priced at the monopoly level. Furthermore, it is impossible to state a coherent theory of vertical exclusion unless two structural preconditions are met. First, the firm possesses monopoly power in one market (typically called the primary market), because without such power the network owner would not have anything to use as leverage over the upstream market for complementary services (Director and Levi 1956; Posner and Easterbrook 1982). Second, the market into which the firm seeks to exercise vertical exclusion (called the secondary market) must be protected by entry barriers. If no such barriers to entry exist, any attempt to raise price in the secondary market will simply attract new competitors until the price drops back down to competitive levels (Posner 1976). Unless these structural preconditions are met, the most that vertical integration would do is rearrange distribution patterns. To use an example based on one of the 28 For overviews of this literature, see Yoo (2002, 2006). 29 Town of Concord V. Boston Edison Co., 915 F.2d 