Apple is in hot water over what appears to be price fixing with major book publishers, in an effort to harm Amazon. Steve Jobs apparently suggested following the agency model, which is more a business model than an actual pricing model.
In the agency model and in regular retail practice, the reseller is a kind of conduit to customers. By way of distributors, products appear on shelves. Resellers buy, based on a percentage of the suggested retail price. The reseller is entirely free to set their own prices (with certain exceptions) and compete with other resellers in the market. Resellers also generate additional revenue off of selling advertisements within their circulars, charging for end cap or point of purchase promotions or other in-store experiences. The agency model works quite differently. Continue reading