[...]The analysis of competitive markets culminated in the fundamental theorems of welfare economics which elucidated the (restrictive) conditions under which resource allocation by markets would achieve Pareto efficiency. The first fundamental theorem says that all perfectly competitive...

In a vertically separated industry, where the input suppliers have significantmarket power, not only entry but also the markets (upstream or downstream) withentry possibilities might be a concern to the policy makers. While ‘entry in thedownstream market only’ always increases welfare,...