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This paper is concerned with supply chain competition and “Free-riding effect” under the assumptions that consumer demands in both online and offline markets are relative to each other. It focuses on “leader-follower” game model under supply chain framework of “one traditional manufacturer leader and one weakest traditional retailer , one online manufacturer is an up-rising star, and the traditional manufacturer leader competes with the online manufacturer in online markets”. After that the paper analyses supply chain partners' optimal decisions and “Free-riding effect” by numerical analysis, especially about the coping strategies of the strong manufacturer. Some conclusions could be found out as follows: Firstly,when the strong traditional manufacturer improves its online promotion effort level, if its promotion level is low, the weakest retailer could achieve “free ride effect” , if it is high, the online manufacturer could achieve “free ride effect” obviously. Secondly, when online market demands become bigger, the retailer's “free ride effect” disappears after come first, however the online manufacturer retailer's “free ride effect” is obvious. As online manufacturer's competitiveness becomes bigger, the strong traditional manufacturer's predominance couldn't be maintained by increasing offline market's capacity.

Supply Chainrs lFree-riding Effectr Based on Online Transaction Advantage of Backwardness