E-book pricing and vertical restraints

Babur De los Santos () and Matthijs Wildenbeest

Quantitative Marketing and Economics (QME), 2017, vol. 15, issue 2, No 1, 85-122

Abstract: Abstract This paper empirically analyzes how the use of vertical price restraints has impacted retail prices in the market for e-books. In 2010, five of the six largest publishers simultaneously adopted the agency model of book sales, allowing them to directly set retail prices. This led the Department of Justice to file suit against the publishers in 2012, the settlement of which prevents the publishers from interfering with retailers’ ability to set e-book prices. Using a unique dataset of daily e-book prices for a large sample of books across major online retailers, we exploit cross-publisher variation in the timing of the return to the wholesale model to estimate its effect on retail prices. We find that e-book prices for titles that were previously sold using the agency model decreased by 18 percent at Amazon and 8 percent at Barnes & Noble. Our results are robust to different specifications, placebo tests, and synthetic control groups. Our findings illustrate a case where upstream firms prefer to set higher retail prices than retailers and help to clarify conflicting theoretical predictions on agency versus wholesale models.

Keywords: E-books; Agency; Vertical restraints; Most favored nation; Media economics; Resale price maintenance; Amazon (search for similar items in EconPapers)
JEL-codes: D43 L41 L42 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Working Paper: E-book Pricing and Vertical Restraints (2014)
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DOI: 10.1007/s11129-017-9183-z

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