Valuation and management of money-back guarantee options

  title={Valuation and management of money-back guarantee options},
  author={Amir Heiman and Bruce McWilliams and Jinhuan Zhao and David Zilberman},
  journal={Journal of Retailing},
Abstract In this article, we model money-back guarantees (MBGs) as put options. This use of option theory provides retailers with a framework to optimize the price and the return option independently and under various market conditions. This separation of product price and option value enables retailers to offer an unbundled MBG policy, that is, to allow the customer to choose whether to purchase an MBG option with the product or to buy the product without the MBG but at a lower price. The… 

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