Self Versus Delegated Distribution in Digital Platforms: The Case of Amazon

Abstract

Within the e-book market, the self-publishing business model that has been boosted by digitalization has become increasingly important. Although self-publishing circumvents distribution intermediaries, consequently yielding unambiguous advantages both for authors and consumers, it also raises some concerns related to Amazon's accrued market dominance. This paper analyzes the pros and the cons of this emerging business by proposing a platform model where consumers are ex ante uncertain about their true preferences on the content, and each content provider sells a differentiated product variety and determines its price around a Salop circle under two structures: self-distribution and delegated distribution. Our results suggest that: i) self-publishing can result in higher e-book prices for consumers under certain circumstances; ii) publishing companies could be driven out of the e-book market by Amazon in the segment of non-specialized books or novels written by emerging authors; however iii) Amazon's dominance over traditional publishing companies should not cause damage to final consumers and, consequently, does not call for regulatory action.