Turning the Page on Business Formats for Digital Platforms: Does Apple's Agency Model Soften Competition?
AbstractThe agency model used by Apple and other platform providers such as Google allows upstream firms (content providers like book publishers and developers of apps) to choose the retail prices of their products (RPM) subject to a fixed revenue-sharing rule. We show that (i) this leads to higher prices if the competitive pressure is higher downstream than upstream; (ii) upstream firms earn positive surplus even when platform providers have all the bargaining power; and (iii) with asymmetric business formats (where only some platform providers use the agency model), a retail most-favored-nation clause leads to retail prices that resemble the outcome under industry-wide RPM.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4362.
Date of creation: 2013
Date of revision:
the agency model; resale price maintenance; most-favored nation clauses; revenue sharing;
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
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