Revenue Sharing Contract in Dual Channel Supply Chain in Case of Free Riding

Abstract

After the Internet channel emerged, consumers can go to the traditional retailer store and accept sales services, and then buy the product from the Internet store. Thus a free riding problem occurs. This paper analyzed the optimal prices of dual channel for the entire supply chain and competing equilibriums of various dual channel structures when free riding problem exists. This paper also studied the application of coordination strategy of revenue sharing contract to various dual channel structures when free riding problem exists. The result shows that revenue sharing contract can fully coordinate the entire supply chain of decentralized dual channel, and can’t fully coordinate the entire supply chain of horizontally integrated dual channel, the revenue sharing contract and a coordination policy of fixed price difference can fully coordinate the entire supply chain of partially integrated dual channel.