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Free riding in a multi‐channel supply chain

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  • Fernando Bernstein
  • Jing‐Sheng Song
  • Xiaona Zheng

Abstract

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. © 2009 Wiley Periodicals, Inc. Naval Research Logistics, 2009

Suggested Citation

  • Fernando Bernstein & Jing‐Sheng Song & Xiaona Zheng, 2009. "Free riding in a multi‐channel supply chain," Naval Research Logistics (NRL), John Wiley & Sons, vol. 56(8), pages 745-765, December.
    • Handle: RePEc:wly:navres:v:56:y:2009:i:8:p:745-765
    DOI: 10.1002/nav.20379
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    References listed on IDEAS

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    Cited by:

    1. Pun, Hubert & Chen, Jing & Li, Wei, 2020. "Channel strategy for manufacturers in the presence of service freeriders," European Journal of Operational Research, Elsevier, vol. 287(2), pages 460-479.
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    3. Lin, Xiaogang & Zhou, Yong-Wu & Hou, Rui, 2021. "Impact of a “Buy-online-and-pickup-in-store” Channel on Price and Quality Decisions in a Supply Chain," European Journal of Operational Research, Elsevier, vol. 294(3), pages 922-935.
    4. Chen, Jing & Chen, Bintong, 2019. "When should the offline retailer implement price matching?," European Journal of Operational Research, Elsevier, vol. 277(3), pages 996-1009.
    5. Yan, Nina & Zhang, Yaping & Xu, Xun & Gao, Yongling, 2021. "Online finance with dual channels and bidirectional free-riding effect," International Journal of Production Economics, Elsevier, vol. 231(C).
    6. Huang, Lingchen & Liu, Bin & Zhang, Rong, 2024. "Channel strategies for competing retailers: Whether and when to introduce live stream?," European Journal of Operational Research, Elsevier, vol. 312(2), pages 413-426.
    7. Fei Gao & Xuanming Su, 2018. "Omnichannel Service Operations with Online and Offline Self-Order Technologies," Management Science, INFORMS, vol. 64(8), pages 3595-3608, August.
    8. Pi, Zhenyang & Fang, Weiguo & Perera, Sandun C. & Zhang, Baofeng, 2022. "Enhancing the online buyer perception of consumer experience products in a dual-channel supply chain: A new role of free-riding," International Journal of Production Economics, Elsevier, vol. 253(C).
    9. Wen-Bin Wang & Qiang Sun & Xiu-Xia Yan & Yuan-Qing Liu, 2022. "Dual-Channel Supply Chain Financing Operation Strategy Considering Free-Riding Effect under Different Power Structures," Sustainability, MDPI, vol. 14(15), pages 1-27, July.
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    13. Zhang, Zhiming & Ren, Da & Lan, Yanfei & Yang, Shanxue, 2022. "Price competition and blockchain adoption in retailing markets," European Journal of Operational Research, Elsevier, vol. 300(2), pages 647-660.
    14. Chen, Jing & Pun, Hubert & Li, Wei, 2018. "Using online channel to defer the launch of discount retailing store," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 120(C), pages 96-115.
    15. Tian, Chen & Xiao, Tiaojun & Shang, Jennifer, 2022. "Channel differentiation strategy in a dual-channel supply chain considering free riding behavior," European Journal of Operational Research, Elsevier, vol. 301(2), pages 473-485.
    16. Xu, Senyu & Tang, Huajun & Lin, Zhijun & Lu, Jing, 2022. "Pricing and sales-effort analysis of dual-channel supply chain with channel preference, cross-channel return and free riding behavior based on revenue-sharing contract," International Journal of Production Economics, Elsevier, vol. 249(C).
    17. Xue, Musen & Zhang, Jianxiong & Zhu, Guowei, 2020. "Quantity decision timing with spillover effect and asymmetric demand information," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 142(C).
    18. Raj, S.P. & Rhee, Byong-Duk & Sivakumar, K., 2020. "Manufacturer adoption of a unilateral pricing policy in a multi-channel setting to combat customer showrooming," Journal of Business Research, Elsevier, vol. 110(C), pages 104-118.
    19. Liu, Zhongyi & Li, Mengyu & Zhai, Xin, 2022. "Managing supply chain disruption threat via a strategy combining pricing and self-protection," International Journal of Production Economics, Elsevier, vol. 247(C).
    20. Xiaoxu Chen & Jingwei Wang & Peng Xu & Thomas Walker & Guoqiang Yang, 2023. "Emission Reduction and Channel Decisions in a Two-Echelon Supply Chain Considering Service Spillovers," Mathematics, MDPI, vol. 11(21), pages 1-27, October.
    21. Xiaona Zheng & Luping Sun & Andy A. Tsay, 2018. "Distribution Channel Strategies and Retailer Collusion in a Supply Chain with Multiple Retailers," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 35(03), pages 1-27, June.
    22. Guang Zhu & Gaozhi Pan & Weiwei Zhang, 2018. "Evolutionary Game Theoretic Analysis of Low Carbon Investment in Supply Chains under Governmental Subsidies," IJERPH, MDPI, vol. 15(11), pages 1-27, November.
    23. Chen, Jingxian & Liang, Liang & Yao, Dong-qing, 2019. "Factory encroachment and channel selection in an outsourced supply chain," International Journal of Production Economics, Elsevier, vol. 215(C), pages 73-83.

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