Abstract: The paper studies two retailers in a supply chain,in which one retailer makes use of free-riding to get part of the demand.The paper studies the impact of free-riding on horizontal price competition.The results show that the equilibrium profit of the online channel will increase and the price competition gets intense when the service level of the retail channel and the original demand of the online channel gets up.What's more,when the margin cost of promotion is low,the equilibrium profit of the retail channel is higher than the online channel and free-riding will exist,which will soften the competition between two channels; when the margin cost of promotion is high,the retail channel can't get profit from promotion,so she will not promote by providing service and free-riding will not exist in this situation.

Key words: free-riding, supply chain, horizontal competition