WSEAS Transactions on Business and Economics
Print ISSN: 1109-9526, E-ISSN: 2224-2899
Volume 13, 2016
Multilateral Bargaining in the Vertically Differentiated Market
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Abstract: In this paper, we examine the bargaining strategy of a distributor who sells vertically differentiated, i.e. high and low brand products. In this multilateral bargaining the negotiations are interdependent due to bargaining externality. We derive and analyze the equilibrium solutions for both simultaneous and sequential bargaining games between the distributor and the manufacturers of the high and low brand products. The results 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 incentive to prefer a low brand product which has lower quality level per unit price.
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Keywords: Multilateral bargaining, Vertically differentiated Market, Simultaneous bargaining, Sequential bargaining, Nash equilibrium solution
Pages: 584-590
WSEAS Transactions on Business and Economics, ISSN / E-ISSN: 1109-9526 / 2224-2899, Volume 13, 2016, Art. #53