The Agency Model and MFN Clauses

Justin P. Johnson

The Review of Economic Studies, 2017, vol. 84, issue 3, 1151-1185

Abstract: I provide an analysis of vertical relations in markets with imperfect competition at both layers of the supply chain and where exchange is intermediated either with wholesale prices or revenue-sharing contracts. Revenue-sharing is extremely attractive to firms that are able to set the revenue shares but often makes the firms that set retail prices worse off. This is so whether revenue-sharing lowers or raises industry profits. These results are strengthened when a market moves from “the wholesale model” of sales to “the agency model” of sales, which results in retailers setting revenue shares and suppliers setting retail prices. I also show that retail price-parity restrictions raise industry prices. These results provide a potential explanation for why many online retailers have adopted the agency model and retail price-parity clauses.

Keywords: Agency Model; Retail price parity; Most-favored Nation Clause; L2; L4 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (84)

Downloads: (external link)
http://hdl.handle.net/10.1093/restud/rdx007 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:84:y:2017:i:3:p:1151-1185.

Access Statistics for this article

The Review of Economic Studies is currently edited by Thomas Chaney, Xavier d’Haultfoeuille, Andrea Galeotti, Bård Harstad, Nir Jaimovich, Katrine Loken, Elias Papaioannou, Vincent Sterk and Noam Yuchtman

More articles in The Review of Economic Studies from Review of Economic Studies Ltd
Bibliographic data for series maintained by Oxford University Press ().