The launch of the iPad creates ripple effects in other industries. iPad will offer e-books and enters in concurrence with Amazon and its Kindle for distributing e-books. The initial negotiation of Apple with book publishers like Macmillan seems to have been done under the shadow of the "agency model" where the publisher retains most of the rights to set the price and gives 30% to the distributor. After an initial announcement by Apple that e-books will be offered at a price of 14.99$, significantly more than the going price of 9.99$ offered by Amazon on the Kindle, Apple later announced that the price will be adjusted to be similar to that on the Kindle. Interestingly, Macmillan -- and probably other publishers -- renegotiated their deal with Amazon, insisting on shifting to the agency model also. See Amazon Reluctantly Agrees to Higher eBook Pricing, Amazon closes the e-book on Macmillan (FT article). and . Amazon bows to Macmillan over e-booksAt the end of the day, more competition for distributing books seems to have given more power to the publishers, and will eventually lead -- at least in the short run -- to higher prices for e-books.
This shows that the welfare analysis of bilateral oligopolies is complex and that entry on one side may lead to higher prices through what can be called a "bargaining effect."
