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This paper examines how wholesale and agency contracts affect retail prices under bargaining. In wholesale, downstream firms set prices; in agency, upstream firms do. Depending on bargaining power, agency leads to higher or lower prices relative to wholesale. We develop a Nash-in-Nash bargaining model and apply it to the e-book industry, which transitioned to agency after a ban on agency expired. This transition raised Amazon’s prices but had little effect on Barnes & Noble. Nash-in-Nash fits the data better than take-it-or-leave-it contracts. Counterfactual simulations show that reinstating most-favored-nation clauses would raise prices by 8% but reduce publisher and Amazon profits.
