Vertical integration lowers costs, boosts profits in industry collusion.
Vertical integration can impact collusion among companies when the input price is linear. The study shows that when one firm is vertically integrated, the collusive equilibrium requires a lower discount factor than in a separated industry. This means that collusion is easier to maintain when firms are vertically integrated. Raising-rivals'-costs strategies are effective in the repeated game analyzed in the study, even though they may seem problematic in a static game.