Free riding and coordination in a dual-channel supply chain in e-commerce

Meiling Luo, Gang Li, Edwin Tai Chiu Cheng

Research output: Journal article publicationJournal articleAcademic researchpeer-review

11 Citations (Scopus)

Abstract

In a dual-channel supply chain, the bricks-and-mortar retailer provides customers with pre-sales services, while the manufacturer adds a direct online channel to enjoy a free ride on the pre-sales services provided by the retailer. Based on consumer utility theory, we first examine the free riding effect on the drivers of each firm's strategy, market sales, profitability, and supply chain performance. We find that the manufacturer's free riding behaviour has both positive and negative effects under some conditions, and the existence of the direct online channel is not necessarily detrimental to the retailer due to a reduction in the wholesale price and an enlargement of the market coverage. We propose a three-part tariff transfer payment scheme based on the retailer's order quantity and service level as a supply chain coordination mechanism. The results show that service level is improved and the coordination mechanism can achieve dual-channel coordination under some conditions.
Original languageEnglish
Pages (from-to)223-249
Number of pages27
JournalInternational Journal of Shipping and Transport Logistics
Volume8
Issue number3
DOIs
Publication statusPublished - 1 Jan 2016

Keywords

  • Competition
  • Dual-channel
  • Free riding
  • Game theory
  • Showrooming
  • Supply chain coordination

ASJC Scopus subject areas

  • Business and International Management
  • Transportation
  • Management Science and Operations Research
  • Management of Technology and Innovation

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