Research on Free-Riding Behavior of a Dual-Channel Supply Chain in E-Commerce

With the rapid development of e-commerce, many companies began to use a manufacture-retail supply chain consisting of a mix of a traditional retail channel and an electronic channel. Free riding in a dual-channel supply chain occurs when one traditional channel engages in the customer service activities necessary to sell a product, while another electronic channel benefits from those activities by making the final sale. This paper quantitatively studies the free-riding behavior of a dual-channel supply chain in E-commerce and the dual-channel models are established. Besides the electronic channelpsilas best-response function and optimal profit, relationship between the free-riding factor and the electronic channelpsilas profit is found. Due to the existence of free riding, the electronic channelpsilas profit is an increasing function of the free-riding factor when the free-riding behavior has positive effect. This is mainly because the electronic channel as a free rider can benefit from the traditional channelpsilas high level of service.This paper also studies the free-riding effects in channel conflict, and presents several response measures.