The impact of vertical integration on losses from collusion

Upstream collusion that increases the price of an input can harm an independent downstream producer (D). We ask whether this harm is more or less pronounced when D's downstream rival is a vertically integrated producer. We find that such vertical integration increases D's loss from collusion when D is not a particularly strong competitor. However, when D is a sufficiently strong competitor, vertical integration can reduce D's loss from collusion when price competition prevails downstream. (c) 2021 Elsevier B.V. All rights reserved.