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Agency Pricing and Bargaining: Evidence from the E-Book Market

Author

Listed:
  • Babur De los Santos
  • Daniel P. O'Brien
  • Matthijs R. Wildenbeest

Abstract

This paper studies the pricing implications of wholesale and agency contracts when input terms are determined through bargaining. We develop a structural Nash-in-Nash bargaining model and show that the distribution of bargaining power determines whether agency contracts raise or lower retail prices relative to wholesale contracts. We apply the model to the e-book market, which transitioned from wholesale to agency contracts after the expiration of a ban on agency contracting. Estimates indicate that the retailers have most of the bargaining power. Counterfactual simulations show that most-favored-nation clauses raise prices but would lower the profits of the publishers and Amazon.

Suggested Citation

  • Babur De los Santos & Daniel P. O'Brien & Matthijs R. Wildenbeest, 2026. "Agency Pricing and Bargaining: Evidence from the E-Book Market," American Economic Journal: Microeconomics, American Economic Association, vol. 18(2), pages 146-191, May.
    • Handle: RePEc:aea:aejmic:v:18:y:2026:i:2:p:146-91
    DOI: 10.1257/mic.20220232
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    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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