Scandinavian Working Papers in Business Administration

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2015/32: Apple's Agency Model and the Role of Resale Price Maintenance

Øystein Foros (), Hans Jarle Kind () and Greg Shaffer ()
Additional contact information
Øystein Foros: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Hans Jarle Kind: Dept. of Economics, Norwegian School of Economics, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Greg Shaffer: Simon Business School, University of Rochester, Postal: University of Rochester , Simon Business School, 305 Schlegel Hall, Rochester, NY 14627, USA

Abstract: The agency model is a business format used by online digital platform providers (such as Apple and Google) in which retail pricing decisions are delegated to upstream content providers subject to a fixed revenue-sharing rule. In a non-cooperative setting with competition both upstream and downstream, we show that the agency model can lead to higher or lower retail prices depending on the firms' revenue-sharing splits and the relative substitution between goods and between platforms. Even if industry-wide adoption of the agency model would lead to higher profits for all firms, there may be equilibria in which it is not universally adopted. Most-favored-nation clauses (used by Apple in the controversial e-books case) can be used in such settings to increase retail prices and induce adoption.

Keywords: Resale price maintenance; interlocking relationships; revenue sharing

JEL-codes: L13; L41; L42

39 pages, November 27, 2015

Full text files 

2365933 PDF-file

Download statistics

Questions (including download problems) about the papers in this series should be directed to Stein Fossen ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2024-03-14 04:36:14.