By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.
The AEA website will be offline briefly for scheduled maintenance after 10:00pm (EST) this evening.
This paper examines how wholesale and agency contracts affect retail prices under bargaining. In wholesale, downstream firms set prices; in agency, upstream firms do. Depending on bargaining power, agency leads to higher or lower prices relative to wholesale. We develop a Nash-in-Nash bargaining model and apply it to the e-book industry, which transitioned to agency after a ban on agency expired. This transition raised Amazon’s prices but had little effect on Barnes & Noble. Nash-in-Nash fits the data better than take-it-or-leave-it contracts. Counterfactual simulations show that reinstating most-favored-nation clauses would raise prices by 8% but reduce publisher and Amazon profits.
