Top publication by Øystein Foros
The article "Apple's Agency Model and the Role of Most-Favored-Nation Clauses" has been accepted for publication in The RAND Journal of Economics.
The RAND Journal of Economics is included on the NHH Bonus list, and it is also on level 4 in the ABS Academic Journal Guide.
Foros, Øystein, Hans Jarle Kind, and Greg Shaffer: Apple's Agency Model and the Role of Most-Favored-Nation Clauses, The RAND Journal of Economics, forthcoming.
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.