Free riding in a multi-channel supply chain

Journal Article (Journal Article)

Free riding in a multichannel supply chain occurs when one retail channel engages in the customer service activities necessary to sell a product, while another channel benefits from those activities by making the final sale. Although free riding is, in general, considered to have a negative impact on supply chain performance, certain recent industry practices suggest an opposite view: a manufacturer may purposely induce free riding by setting up a high-cost, customer service-oriented direct store to allow consumers to experience the product, anticipating their purchase at a retail store. This article examines how the free riding phenomenon affects a manufacturer's supply chain structure decision when there are fixed plus incremental variable costs for operating the direct store.We consider factors such as the effort required to find and buy the product at a retail store after visiting the direct store, the existence of competing products in the market, and the extent of consumer need to obtain direct-store service. Copyright © 2009 Wiley Periodicals, Inc.

Full Text

Duke Authors

Cited Authors

  • Bernstein, F; Song, JS; Zheng, X

Published Date

  • December 1, 2009

Published In

Volume / Issue

  • 56 / 8

Start / End Page

  • 745 - 765

Electronic International Standard Serial Number (EISSN)

  • 1520-6750

International Standard Serial Number (ISSN)

  • 0894-069X

Digital Object Identifier (DOI)

  • 10.1002/nav.20379

Citation Source

  • Scopus