Information Acquisition and the Excess Refund Puzzle

@article{Matthews2005InformationAA,
  title={Information Acquisition and the Excess Refund Puzzle},
  author={Steven A. Matthews and Nicola G. Persico},
  journal={Penn Institute for Economic Research (PIER) Working Paper Series},
  year={2005}
}
A buyer can learn her value for a returnable experience good by trying it out, with the option of returning the good for whatever refund the seller oers. Sellers tend to oer a "no questions asked"refund for such returns, a money back guarantee. The refund is often too generous, generating ine¢ ciently high levels of returns. We present two versions of a model of a returnable goods market. In the Information Acquisition Model, consumers are ex ante identical and uninformed of their private… 
Information Acquisition and Refunds for Returns
A product exhibits personal fit uncertainty when its consumers have idiosyncratic and uncertain values for it. Often a consumer can learn her long-run value quickly by obtaining the good for a trial
Auctions with Refund Policies as Optimal Selling Mechanisms
Many sellers in online auctions such as eBay.com provide refund policies. This paper investigates how a refund policy aects a buyer’s strategic behavior by characterizing the equilibria of a
Money-Back Guarantees
We provide a framework to evaluate whether or not a seller can increase his revenue in interacting with a privately informed buyer by using money-back guarantees (MBGs). The buyer’s value for the
Optimal Reverse Channel Structure for Consumer Product Returns
TLDR
Interestingly, it is found that the return penalty may be more severe when returns are salvaged by a channel member who derives greater value from a returned unit.
Fit Risk: Secondhand Market versus Money-back Guarantee
Consumers face a great fit risk when they purchase products, especially when they purchase experience goods whose quality is unknown and is revealed after consuming. The fit uncertainty can be caused
Product Line Design with Seller-Induced Learning
TLDR
The result indicates that the seller-induced learning may eliminate the conflict between rent extraction and efficiency initiatives, and quality distortion prevails when the seller provides an identical menu for all the consumers or the free seller- induced learning.
Managing Consumer Returns in a Competitive Environment
This paper investigates the pricing and restocking fee decisions of two competing firms selling horizontally differentiated products. We model a duopoly facing consumers who have heterogeneous tastes
Revenue Maximizing with Return Policy When Buyers Have Uncertain Valuations
This paper examines the optimal mechanism design problem when buyers have uncertain valuations. This uncertainty can only be resolved after the actual transactions take place and upon incurring
Competitive Returns Management: Why Higher Salvage Values are Not Necessarily Better
Online e-tailers face return rates of up to 50%, sharply reducing profits. They pursue two classes of mitigation-actions: First, proactive returns management controls the number of returns by
...
...

References

SHOWING 1-10 OF 41 REFERENCES
Sequential Screening
We present a model of price discrimination where a monopolist faces a consumer who is privately informed about the distribution of his valuation for an indivisible unit of good but has yet to learn
Optimal Information Disclosure in Auctions and the Handicap Auction
We analyse a situation where a monopolist is selling an indivisible good to risk-neutral buyers who only have an estimate of their private valuations. The seller can release, without observing,
Optimal Information Disclosures in Auctions: The Handicap Auction
We analyze the situation where a monopolist is selling an indivisible good to risk neutral buyers who only have an initial estimate of their private valuations. The seller can release (but cannot
Demand Uncertainty and Returns Policies
Manufacturers facing uncertain demand may induce distributors to carry ample stocks of their products by agreeing to accept returns of unsold goods for credit. The authors model the manufacturer's
Supplying Information to Facilitate Price Discrimination
The authors examine the incentive of a seller to allow potential buyers to acquire private information about their tastes for the seller's product. Improved private information for buyers enables the
Customer Return Policies for Experience Goods
This paper studies the economic rationale for customer return policies by focusing on the 'experience goods' aspect of many products. Return policies allow consumers to defer their purchasing
Information and Consumer Behavior
  • P. Nelson
  • Business, Economics
    Journal of Political Economy
  • 1970
Consumers are continually making choices among products, the consequences of which they are but dimly aware. Not only do consumers lack full information about the prices of goods, but their
Information Management in Incentive Problems
We extend the standard procurement model to examine how an agent is optimally induced to acquire valuable planning information before he choose an unobservable level of cost‐reducing effort. Concerns
Measurement Cost and the Organization of Markets
  • Y. Barzel
  • Economics
    The Journal of Law and Economics
  • 1982
PEOPLE will exchange only if they perceive what they get to be more valuable than what they give. To form such perceptions, the attributes of the traded items have to be measured. Some measurements
...
...