A hybrid channel stackelberg game under transaction cost analysis

Traditionally, firms use intermediaries to reach final customers. Recently more firms have chosen to rely exclusively on direct channels, bypassing intermediaries to indirect channel from, for example, Internet retailers. In this paper, we propose a hybrid channel under transaction cost analysis (TCA) to extend the previous work by Chen, et al. to assess a hybrid channel environments. Game theory is used to compare a non-cooperative equilibrium of a differential game (Manufacturer-leader and Retailer-leader games) played under Stackelberg leadership strategies. Our analysis also reveals interaction effects between hybrid channel (manufacturer) and direct channel (retailer) channel performance levels. The implications of these findings and directions for future research are discussed.