Agency model versus wholesale model

Dingwei Gu and Yangguang Huang

Information Economics and Policy, 2024, vol. 68, issue C

Abstract: Agency and wholesale models are widely adopted vertical contractual agreements. This paper compares the private incentives and social welfare of these two business models by highlighting the differences in move order and price structure. With a monopoly platform, the agency model dominates the wholesale model with respect to social welfare and the platform's profit if and only if demand is subconvex. With duopoly platforms, having both platforms adopt the agency model is socially desirable, and it is a dominant-strategy Nash equilibrium if demand is weakly convex. Our findings have novel theoretical contributions and offer insights into some influential antitrust cases.

Keywords: Online platform; Agency model; Wholesale model; Vertical relationship; Antitrust (search for similar items in EconPapers)
JEL-codes: D42 L14 L22 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:iepoli:v:68:y:2024:i:c:s0167624524000155

DOI: 10.1016/j.infoecopol.2024.101093

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