Agency Pricing and Bargaining: Evidence from the E-Book Market
2026-04-27
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. (JEL C78, D86, K21, L14, L42, L81, L82)