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| Pricing Strategies and Incentive Compensation Mechanism for Brands Based on Unidirectional and Bidirectional Free-Riding of Services |
| ZHOU Jianheng，WU Bo |
| Donghua University, Shanghai, China |
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Abstract Taking into account the consumer service free-riding behavior and the fact that retailer effort is not easily observed, this study constructs an incentive model with visible (invisible) retailer effort information in different environments. The results show that, in the case of invisible effort, the brand can motivate the retailer through a combination of rewards and penalties. Furthermore, the retailer’s potential to receive compensation rewards and service upgrades is non-monotonic. Interestingly, if the bidirectional free-riding factor satisfies certain conditions, the brand makes more profits when the effort information is invisible. The bidirectional free-riding scenario also leads the brand to reduce the information rent paid to the retailer due to the cost free-riding effect. In addition, the brand should create a bidirectional free-riding market environment only when the channel interaction coupling effect is strong and the asymmetric information effect is weak.
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Received: 06 June 2022
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