Abstract
PurposeThe purpose of this paper is to study the effects of the requirement on product quality and refund (return service charge).Design/methodology/approachThe authors set a minimum product quality level for platform to study the effects of the minimum product quality level on product quality and refund for risk-neutral sellers and risk-averse sellers, respectively.FindingsFor the risk-neutral sellers whose optimal product quality level is lower than the minimum level will improve the product quality to the minimum required level. However, under a certain condition with the requirement the sellers will increase refund. Similar results are found when uncertainty is incorporated into demand and return quantity. In addition, how the sellers’ optimal refund is affected by market parameters and market volatile factors is discussed. Specially, the correlation between the uncertainty of the demand and the return quantity affects sellers’ optimal decision of return service charge in many ways.Originality/valueThe obtained results can provide operational managers in reality with valuable suggestions in quality management for platform.
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