rtical inte- gration could yield substantial efficiencies. For example, if two layers of a vertical chain of distribution are monopolistic or oligopolistic, firms in each layer will have the incentive to try to extract the entirety of the available supracompetitive returns, which would lead to an aggregate price that would be even higher than the monopoly price. Vertical integration can eliminate this so-called double marginal- ization problem, because a company that spans both layers would rationalize the decisionmaking between the two levels of production and would avoid the uncoor- dinated action that would make the supracompetitive pricing even worse (Spengler 1950; see also Machlup and Taber 1960, reviewing the early scholarship on successive monopoly theory). In addition, to the extent that the inputs can be used in variable proportions, any attempt to charge supracompetitive prices for one input creates incentives for firms to substitute alternative inputs whenever possible. The resulting substitution creates an alternative potential source of inefficiency, as production processes deviate from the most efficient input mix. Allowing the provider of the monopolized input to ver- tically integrate into manufacturing can allow it to prevent inefficient input substi- tution (McKenzie 1951; Bowman 1957; Burstein 1960; Vernon and Graham 1971). The welfare implications of input substitution are ultimately ambiguous, because prohibiting input substitution enhances the monopolist's ability to exercise market power, which can create welfare losses sufficient to offset the welfare gains from preventing customers from deviating from the most efficient input mix. Determin- ing which of the two countervailing effects will dominate can be quite difficult.³ The consensus is that any reduction in welfare from preventing input substitution is likely to be small enough not to pose a problem significant enough to be worth redressing (Perry 1989; Salinger 1991; Reiffen and Vita 1995). Finally, scholars building on Coase's semin