Return policies and the optimal level of “hassle”

Davis, Scott W.; Hagerty, Michael R.; Gerstner, Eitan

doi:10.1016/s0148-6195(98)00013-7

“…we may think of h as a "hassle" cost, as suggested by Davis, Hagerty, and Gerstner (1998). This implies that when the potential refund is r, only consumers with valuations less than r − h will return the product, and the ex-ante willingness to pay is E max(V, r − h).…”

Section: Consumer Travel Costmentioning

confidence: 99%

Consumer Returns Policies and Supply Chain Performance

Su

¹

2009

M&SOM

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This paper develops a model of consumer returns policies. In our model, consumers face valuation uncertainty and realize their valuations only after purchase. There is also aggregate demand uncertainty, captured using the conventional newsvendor model. In this environment, consumers decide whether to purchase and then whether to return the product, whereas the seller sets the price, quantity, and refund amount.Using our model, we study the impact of full returns policies (e.g., using 100% money-back guarantees) and partial returns policies (e.g., when restocking fees are charged) on supply chain performance. Next, we demonstrate that consumer returns policies may distort incentives under common supply contracts (such as manufacturer buy-backs), and we propose strategies to coordinate the supply chain in the presence of consumer returns. Finally, we explore several extensions and demonstrate the robustness of our findings. AbstractThis paper develops a model of consumer returns policies. In our model, consumers face valuation uncertainty and realize their valuations only after purchase. There is also aggregate demand uncertainty, captured using the conventional newsvendor model. In this environment, consumers decide whether to purchase and then whether to return the product, while the seller sets the price, quantity, and refund amount.Using our model, we study the impact of full returns policies (e.g., using 100% money back guarantees) and partial returns policies (e.g., when restocking fees are charged) on supply chain performance. Next, we demonstrate that consumer returns policies may distort incentives under common supply contracts (such as manufacturer buy-backs), and we propose strategies to coordinate the supply chain in the presence of consumer returns. Finally, we explore several extensions and demonstrate the robustness of our findings.

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“…Chu, Gerstner, and Hess (1998) study the distinction between "no-questions-asked" and "verifiable problems only" and find that the former is the optimal solution to handle consumer opportunism. In another paper, Davis, Hagerty, and Gerstner (1998) analyze the optimal level of "hassle" on returns policies. Yalabik, Petruzzi and Chhajed (2005) also study the optimal amount of logistics investment (which reduces the costs of returning) as well as the optimal marketing investment (which decreases the probability of returns).…”

Section: Literature Reviewmentioning

confidence: 99%

Consumer Returns Policies and Supply Chain Performance

Su

¹

2008

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This paper develops a model of consumer returns policies. In our model, consumers face valuation uncertainty and realize their valuations only after purchase. There is also aggregate demand uncertainty, captured using the conventional newsvendor model. In this environment, consumers decide whether to purchase and then whether to return the product, whereas the seller sets the price, quantity, and refund amount.Using our model, we study the impact of full returns policies (e.g., using 100% money-back guarantees) and partial returns policies (e.g., when restocking fees are charged) on supply chain performance. Next, we demonstrate that consumer returns policies may distort incentives under common supply contracts (such as manufacturer buy-backs), and we propose strategies to coordinate the supply chain in the presence of consumer returns. Finally, we explore several extensions and demonstrate the robustness of our findings. AbstractThis paper develops a model of consumer returns policies. In our model, consumers face valuation uncertainty and realize their valuations only after purchase. There is also aggregate demand uncertainty, captured using the conventional newsvendor model. In this environment, consumers decide whether to purchase and then whether to return the product, while the seller sets the price, quantity, and refund amount.Using our model, we study the impact of full returns policies (e.g., using 100% money back guarantees) and partial returns policies (e.g., when restocking fees are charged) on supply chain performance. Next, we demonstrate that consumer returns policies may distort incentives under common supply contracts (such as manufacturer buy-backs), and we propose strategies to coordinate the supply chain in the presence of consumer returns. Finally, we explore several extensions and demonstrate the robustness of our findings.

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“…In his study, Davis (1998) observed that the relationship between return policy and sales volume, and points out that the loose-return policy can increase the sales volume. Based on general management, loose return policy will reduce consumer perceived effort level, return operation is more convenient, and consumers are more prone to return behavior.…”

Section: Return Policy and Perceived Riskmentioning

confidence: 97%

“…According to the Value-Determination theory of marketing, the market price of the commodity has a certain time, so the 'return time limit' is also a limiting factor in the return policy. As for the efforts, Davis (1998) firstly postulates the concept of "Hassle". Enterprises can adjust the level of "Hassle", affecting consumers return behavior (Su, 2009).…”

Section: Dimension Of Return Policymentioning

confidence: 99%

Review of the Research on the Impact of Online Shopping Return Policy on Consumer Behavior

Wang¹,

Qu²

2017

JBAR

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Based on the relevant literature, this paper study the impact of online shopping return policy on consumer purchase behavior from the dimension of return policy, consumer perception, consumer purchase behavior and so on. In the online shopping environment, the return problem between retailers and consumers is more obvious. Based on the researching achievements of predecessors, return policy can be divided into three dimensions: return cost, return time limit and efforts. Consumer psychological perception of return policy is based on the traditional consumer perception, which can be summarized into three aspects: perceived risk, perceived quality and perceived fairness. In the online shopping environment, the consumer purchase behavior is still a specific research and in-depth discussion. The return policy, as the key information between the two decision points, is of great importance to consumers' purchase and return behaviors. Keywords:Online shopping, Return policy, Perceived risk, Perceived quality, Perceived fairness, Consumer purchasing behavior IntroductionIn recent years, the rapid development of the Internet, mobile phones, tablet computers and other electronic devices has changed the way people shop. Online shopping has become the main stream of people's consumption. Online shopping has changed the traditional way of shopping, brought us great convenience, but there have been some noteworthy issues. According to relevant media reports, in November 11, 2015, even though the day trading volume of up to 91 billion, there are 63% return rate. Different from the traditional shopping, consumers cannot understand the characteristics of the product directly in the network environment, and it is easy to misunderstand the graphic description of the item. Consequently, the return rate increased.The problem of online shopping return is becoming more and more obvious, which has become an important factor in consumer shopping experience and business management. Those problems are uncommon in the traditional shopping model, which need to improve in the consumer behavior theoretic-which has become the focus of research scholars. Based on the relevant literature, this paper studies the impact of online shopping return policy on consumer purchase behavior from the dimension of return policy, consumer perception, and consumer purchase behavior. Dimension of Return PolicyAs the main strategy in the field of logistics and supply chain management, the return policy is the competitive means for the manufacturer to manage the retailer effectively. The traditional return problem can be classified into two categories: one is the return problem between the retailer and the supplier, and the other is the return problem between the retailer and the consumer. The earliest research on return policy is based on the traditional purchasing environment, Fornell and Wernerfelt (1987) believe that liberal return policy can improve customer loyalty and positive word-of-mouth. Therefore, enterprise should regard the return policy as ...

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Return policies and the optimal level of “hassle”

Cited by 240 publications

References 12 publications

Consumer Returns Policies and Supply Chain Performance

Consumer Returns Policies and Supply Chain Performance

Consumer Returns Policies and Supply Chain Performance

Review of the Research on the Impact of Online Shopping Return Policy on Consumer Behavior

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