Valuation and management of money-back guarantee options

Heiman, Amir; McWilliams, Bruce; Zhao, Jinhua; Zilberman, David

doi:10.1016/s0022-4359(02)00065-9

Cited by 81 publications

(40 citation statements)

References 23 publications

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“…Several studies …nd that higher-quality retailers, such as up-market stores or internet retailers with a higher customer rating, o¤er more generous terms (e.g., Heiman et al 2002;Boni…eld et al 2010). When …rm characteristics and product quality are unobservable to customers at the time of purchase, this relationship could be explained through signaling, similar to the theory of warranties put forward by Grossman (1981).…”

Section: Introductionmentioning

confidence: 92%

Refunds as a Metering Device

Inderst

Tirosh

2011

SSRN Journal

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Firms frequently o¤er refunds, both when physical products are returned and when service contracts are terminated prematurely. We show how refunds act as a "metering device" when consumers learn about their personal valuation while experimenting with the product or service. Our theory predicts that low-quality …rms o¤er ine¢ ciently strict terms for refunds, while high-quality …rms o¤er ine¢ ciently generous terms. This may help to explain the observed variety in contractual terms. As in our model strict cancellation terms and low refunds are used to price discriminate, rather than to trap consumers into purchasing inferior products, the imposition of a statutory minimum refund policy would not, in general, improve consumer surplus or welfare.

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Section: Introductionmentioning

confidence: 92%

Refunds as a Metering Device

Inderst

Tirosh

2011

SSRN Journal

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“…In case the number of failures during warranty period exceed a predetermine value, k, then the buyer has the option of returning the item for 100% money back. The warranty ceases either when the buyer returns the remanufactured product or the product reaches the end of the warranty period [12,13].…”

Section: Money Back Guarantee Policymentioning

confidence: 99%

Money-Back Guarantee Warranty Policy for Sensor Embedded Remanufactured Products

Alqahtani¹,

Gupta²

2018

dtetr

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Manufacturers attempt to respond to consumers' concerns involving environmental issues as well as the more governmentally stringent environmental legislations by establishing facilities which include the minimization of the totality of waste relocated to landfills by recovering materials and components from returned, or End-Of-Life (EOL) products and reuse them to build a remanufactured product, and/or novel components. In this paper, an optimization simulation model for remanufactured items sold with one-dimensional non-renewing Money Back Guarantee (MBG) Warranty policy is proposed from the view of remanufacturer, in which, an End-Of-Life product (EOLP) is subjected to upgrade action at the end of its past life and during the warranty period. Finally, a numerical example and Design of Experiment analysis are provided to demonstrate the proposed approach.

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“…Heiman et al (2001) argue that the money-back guarantee service and demonstrations are two primary risk reduction tools to reduce consumers' risk of prepurchase uncertainty. Heiman et al (2002) further examine the money-back guarantee service program and mention that it can be offered to customers as an option where customers are authorized to buy the product bundled with money-back guarantee or without it, usually with Downloaded from informs.org by [34.213.178.48] on 09 May 2018, at 20:39 . For personal use only, all rights reserved.…”

Section: Money-back Guarantee Service Programsmentioning

confidence: 99%

“…Notice that the money-back guarantee service may be proposed to consumers as an option where consumers are authorized to buy the product bundled with a money-back guarantee or without it 1 (Heiman et al 2002).…”

Section: Introductionmentioning

confidence: 99%

Pareto Improving Supply Chain Coordination Under a Money-Back Guarantee Service Program

2017

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Abstract. Money-back guarantee (MBG) is a well-known service offered by many retailers. Under the MBG policy, a purchased item by a consumer can be returned for a full refund. In this paper, we explore a supply chain (SC) system comprising of one retailer, which offers the money-back guarantee policy and faces a stochastic demand. With a given supply contract offered by the supplier, the retailer makes decisions on the order quantity and the market coverage of the money-back guarantee service. With reference to real-world practices, we examine three models, namely, (1) the traditional wholesale pricing model without the buyback contract, (2) the model with a buyback contract (between the supplier and the retailer) for unsold items, and (3) a dual-buyback (DB) contract model for both unsold and consumer returned items. We find that using the buyback contract alone for unsold items cannot achieve Pareto improving supply chain coordination, whereas the DB contract can. Numerical findings also indicate that the DB contract can lead to an expansion of the money-back guarantee service program to cover more customers. This paper's findings support the implementation of the DB contract, which is commonly seen in the industry, for efficient supply chain management in the presence of the money-back guarantee service program.

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Valuation and management of money-back guarantee options

Cited by 81 publications

References 23 publications

Refunds as a Metering Device

Refunds as a Metering Device

Money-Back Guarantee Warranty Policy for Sensor Embedded Remanufactured Products

Pareto Improving Supply Chain Coordination Under a Money-Back Guarantee Service Program

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