Abstract: To investigate the impact of the free-riding behavior under the circumstance of charging the free riders' product experience fee by the brick and mortar retailer, and explore the condition that the brick and mortar retailer is willing to charge the free riders' product experience fee, a dual-channel supply chain consisting of a manufacturer and a brick and mortar retailer is set up. Based on the consumer utility theory, the pricing strategy, market demand and the profits with the consumers' free-riding behavior are analyzed by using K-T (Kuhn-Tucker) condition. The results show that the experience fee set by the brick-and-mortar retailer has a positive impact on retailer channel sales price, while it has a negative impact on online channel sales price when the consumers' travel cost is low. The study further shows that the profits of the manufacturer will be damaged and the competition between the manufacturer and the brick and mortar retailer will be intensified when the brick and mortar retailer charges the product experience fee of the free-riding consumer.

Key words: product experience fee, free-riding, dual-channel, brick and mortar retailer