The proliferation of the Internet and communication technologies and applications, besides the conventional retailers, has led to a new form of distribution channel, namely home sopping through the telephone, TV, catalog or the Internet. The conventional and new distribution channels have different transaction costs perceived by the consumers in the following perspectives: the accessibility to the product information, the traffic cost and the opportunity cost for the time to visit the store, the possibility of ‘touch and feel’ to test the quality of the product, the delivery time and the concern for the security for the personal information. Difference in the transaction costs between the distribution channels results in the different selling prices even for the same product. Moreover, distribution channels with different selling prices necessarily result in different business surpluses. In this paper, we study the multilateral bargaining strategy of a manufacturer who sells a product through multiple distribution channels with different transaction costs. We first derive the Nash equilibrium solutions for both simultaneous and sequential bargaining games. The numerical analyses for the Nash equilibrium solutions show that the optimal bargaining strategy of the manufacturer heavily depends not only on the degree of competition between the distribution channels but on the difference of the business surpluses of the distribution channels. First, it is shown that there can be four types of locally optimal bargaining strategies if we assume the market powers of the manufacturer over the distribution channels can be different. It is also shown that, among the four local optimal bargaining strategies, simultaneous bargaining with the distribution channels is the most preferred bargaining strategy for the manufacturer.

In this paper, we study the bargaining strategy of a distributor who sells vertically differentiated, i.e. high and low brand products. We derive and analyze the equilibrium solutions for both simultaneous and sequential bargaining games among the distributor, the high brand product manufacturer and the low brand product manufacturer. The result shows that the optimal bargaining strategy for the distributor heavily depends on the relative quality and price level of the low brand product comparing to those of the high brand product. It is also shown that, for more bargaining profit, the distributor has strong motivation to prefer a low brand product which has lower quality level per unit price.

In this paper, we study the bargaining strategy of a manufacturer who sells a product through the online and offline distribution channels. To do this, we derive and analyze the equilibrium solutions for both simultaneous and sequential bargaining games. The result shows that the optimal bargaining strategy heavily depends on the size of the online distribution channel’s loyal customers and the difference between the retail prices of the online and the offline distribution channels. It is also shown that, in some cases, the online distribution channel has incentive to downsize its loyal customers and its retail price for a better bargaining outcome.