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

Babur De los Santos, Daniel P. O'Brien and Matthijs R. Wildenbeest

American Economic Journal: Microeconomics, 2026, vol. 18, issue 2, 146-91

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.

JEL-codes: C78 D86 K21 L14 L42 L81 L82 (search for similar items in EconPapers)
Date: 2026
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DOI: 10.1257/mic.20220232

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