Service and Price Strategies With Bidirectional Free-Riding in Dual-Channel

The co-existence of offline and online channels makes customers easily enjoy services from one channel but buy from another. This phenomenon is called bidirectional free-riding, and its impact on both channels is an essential issue. Our study finds that (1) inconsistent pricing strategy increases offline sales and profits with the degree of bidirectional free-riding rising but decreases the online sales and profits; (2) consistent pricing strategy could mitigate the negative impact of bidirectional free-riding on the retailer, but it is at the expense of the manufacturer's profits; (3) the lower degree of bidirectional free-riding makes both channels more willing to improve their service in a consistent pricing strategy, here the retail price and overall profit goes higher; (4) the higher degree of bidirectional free-riding makes both more willing to reduce the price competition in an inconsistent pricing strategy, here the overall profit goes higher. The above conclusions reference optimal channel decisions for online manufacturers and offline retailers