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Electricity systems in many parts of the world are becoming more dependent upon natural gas as an electricity-generation fuel. As such, electricity and natural-gas markets are becoming more interconnected. Contemporaneously, some electricity and natural-gas markets are integrating vertically, through the merger of electricity and natural-gas suppliers. The market-efficiency impacts of such vertical integration are unclear. On one hand, vertical integration could exacerbate market power, whereas on another it could mitigate double marginalization. To study this question, this paper develops a Nash–Cournot model of the two interconnected markets. The model is converted into a linear complementarity problem, which allows deriving Nash equilibria readily. Some theoretical results are derived for the case of a merger involving symmetric firms. In addition, the model is applied to a stylized example with a range of parameter values. We find that integration is social-welfare enhancing—which implies that mitigating double marginalization outweighs the exercise of market power. In most cases, the effects of merger can give rise to a prisoner’s-dilemma-type outcome. Merger is beneficial to the merging firms. However, profits of non-merging firms and total supplier profits decrease following a merger. Overall, our results suggest that vertical integration in energy markets may be socially beneficial. JEL Classification:C61, C72, D43, L1, L94, L95, Q4