Browsing by Author "Encina Díaz, Isabel Margarita"

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    Wholesale and agency agreements with complementary goods in the e-book market
    (2014) Encina Díaz, Isabel Margarita; Bobenrieth H., Eugenio S.; Harrison Vergara, Rodrigo José; Montero Ayala, Juan Pablo; Pontificia Universidad Católica de Chile. Instituto de Economía
    This work determines what happens to firm and consumer surplus when market interaction changes from a wholesale model to an agency one. It shows that complementarity can exist between the various goods offered by the downstream retailers. In this case, each downstream sells e-books and e-readers. This complementarity reduces the tablet\2019s relative price under an agency model compared to the wholesale price. It could also raise the e-book retail price under agency when compared to wholesale. This last effect depends on whether the tablet market is being completely supplied for or not. This paper uses a theoretical model based on horizontal differentiation to compare the results for consumers and firms under wholesale versus agency models. It finds that consumers are better under the latter. The surplus of downstream firms and aggregate surpluses never decrease under an agency model when compared to the wholesale model. The upstream publisher, however, is worse off under agency.