A study about return policies in the presence of consumer social learning

Abstract

Sellers are conventionally generous with their return policies for valuation‐uncertain products, such as experience products and new products. However, with the development of online review platforms, an increasing number of consumers are engaging in social learning by referring to others' reviews to reduce valuation uncertainty. In this study, we investigate how social learning interacts with sellers' return policies. There are three main conclusions. First, when sellers have a relatively higher expectation of product quality (or simply the product quality is high), social learning makes the sellers offering either no‐refund policies or partial‐refund policies better off in terms of the increased profit. It will cause the no‐refund sellers to choose higher prices and inventory, and the partial‐refund sellers to set lower prices and refund amounts. Second, under social learning, the partial‐refund policy tends to be more beneficial to sellers than both full‐refund and no‐refund policies; although, when the product quality is high, the no‐refund policy tends to bring more benefits to sellers than the full‐refund policy. Hence, sellers may finally switch to the partial‐refund policy. Third, for partial‐refund policies, more often than not, social learning increases social welfare when the product quality is high; specifically, in many cases, it increases not only the profit of the seller but also the welfare of consumers.

Sourcing strategies of manufacturers with customer returns and product design efforts

“…Feng et al (2020) study a quality disclosure strategy in a supply chain with one manufacturer and one retailer who offers a partial refund policy. Liu et al (2022) show that a partial refund policy is more beneficial than both full refund and no refund policies when customers are engaging in social learning to reduce valuation uncertainty. Yan et al (2022) demonstrate that in a competitive market, a partial refund policy is desirable only when one of the retailers adopts a buy online and return in store strategy.…”

“…Liu et al. (2022) show that a partial refund policy is more beneficial than both full refund and no refund policies when customers are engaging in social learning to reduce valuation uncertainty. Yan et al.…”

Optimal dynamic pricing for public transportation considering consumer social learning

“…Factors influencing consumer social learning include social networks, personal trust, information reliability, and cognitive ability. Through social networks, consumers can share their shopping experiences and advice with others and obtain a wider range of information and feedback [ 33 , 34 ]. Consumer trust and information reliability are also important factors influencing social learning, as consumers tend to trust sources that have a reliable reputation and word of mouth [ 35 ].…”

Improving supply chain transparency with blockchain technology when considering product returns

“…There are some studies explored the impact of disclosing information on consumer return (Zhang et al, 2018;Zhao et al, 2018;Cao et al, 2020;Feng et al, 2020;Liu et al, 2022;Yang et al, 2022). For example, Zhang et al (2018) developed an analytical model to investigate how intermediaries and sellers can manage consumer uncertainty and returns/exchanges by disclosing product information.…”

“…Feng et al (2020) studied the quality disclosure strategy of a manufacturer/retailer in a supply chain with consumers return for a new product. Based on the development of an online review platform, Liu et al (2022) investigated how social learning interacts with seller's return policies. They found that when the seller has a relatively high expectation of product quality, social learning causes the seller to offer either a no refund policy or a partial refund policy, thereby increasing profit.…”