Research of Free Rides in E-Commerce

A consumer "free rides" when the customer uses services at one retailer (e.g., test or examines clothing), but purchases the merchandise at another retailer (for example, an online store). This paper examines the impact of free riding and E-commerce on the provision of retail services by focusing on two types of consumer heterogeneity. Consumers are heterogeneous with regard to: location and their preferences for purchasing online vs. offline. In a sense, consumer riding is analogous to a theft of services. It is difficult to see how the retailer providing services could benefit from consumer free riding. None the less, we established models to analyze this phenomenon and find that, under certain circumstances, the retailer providing services does benefit from consumer free riding. As consumer free increases, the E-commerce retailer becomes more competitive and raises prices, thereby reducing competition with the conventional retailer. Consumer free riding softens competition between the conventional retailer (who provides the services) and the E- commerce retailer (who sometimes makes the sale).