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Agency model versus wholesale model

Author

Listed:
  • Gu, Dingwei
  • Huang, Yangguang

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.

Suggested Citation

  • Gu, Dingwei & Huang, Yangguang, 2024. "Agency model versus wholesale model," Information Economics and Policy, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:iepoli:v:68:y:2024:i:c:s0167624524000155
    DOI: 10.1016/j.infoecopol.2024.101093
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    More about this item

    Keywords

    Online platform; Agency model; Wholesale model; Vertical relationship; Antitrust;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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