Composite Contracts for Dual-Channel Supply Chain Coordination with the Existence of Service Free Riding

This paper aims to investigate how coordinate a dual-channel supply chain composing of manufacturer and retailer when customers utilize the retailer’s service conduct free-riding behavior. Specially, we consider crucial role in affecting customers’ valuation for kind experience product establish channel choice model by employing utility theory. Then, analyze optimal pricing decisions under decentralized centralized scenarios. To achieve overall optimization, propose three contract mechanisms, namely price hike (Mechanism 1), with cost sharing 2) surplus compensation 3). We reveal way difference provision customer Besides, find that mechanisms can reduce behavior some extent. However, extent varies different is related cost-sharing fraction degree which increases his online price. Further, Mechanism 3 realize optimization members’ win–win situations. Finally, numerical examples explore affect efficiency. The results also provide managerial insights firms practice.