Abstract: Given that the existing studies have not been concerned with the impact of countervailing power on retailers’ service decision， three optimal service decision models were constructed， including the model in which suppliers vertically integrate， the model in which retailers have no countervailing power and the model in which chain retailers have countervailing power. Moreover， the impacts of countervailing power on retailers’ optimal service decision and the overall service levels on the market were analyzed. It was found that chain retailers’ service levels increase with the rise of their countervailing power. However， local retailers’ service levels will first reduce and then rise with the increase of chain retailers’ countervailing power. Moreover， the overall service levels on the market will increase even excessively when chain retailers have countervailing power. Finally， an example was given to verify the conclusions of the current study and to analyze the sensitivity of service to the base of market demands and the degree of service competition.

Key words: countervailing power, service decision, chain retailer, local retailer