Full Refund Research Articles

Optimal Return Service Charging Policy for a Fashion Mass Customization Program

Mass customization (MC) service is a pertinent industrial practice in the fashion industry. To foster trust and enhance demand, some brands now allow dissatisfied customers to return the MC fashion product for a full refund minus a service charge. The service charge is a measure to avoid the abuse of the return right and to subsidize the operations cost (e.g., shipping) and loss from the return. Motivated by this observed industrial practice, this paper analytically examines the optimal return service charge policy. We separate the study into two cases—those of risk-neutral and those of risk-averse MC companies, respectively. For each case, we derive the closed-form expression of the optimal return service charge, and we conduct analytical sensitivity analysis to illustrate how different important parameters in the model affect the optimal return service charge. In addition, by comparing the two cases, we reveal how the MC service provider's level of risk aversion affects the optimal return service charge policy. Finally, we derive the conditions under which it is optimal to offer a zero return service charge (i.e., free return with a full refund). These conditions provide insight on the real-world practice in which some fashion companies offer free return service to their registered members but not to every customer.

No Refund or Full Refund: When Should a Fashion Brand Offer Full Refund Consumer Return Service for Mass Customization Products?

We analytically explore in this paper the consumer return policy under fashion mass customization (MC) program. To be specific, we model the stochastic fashion MC program with the consideration of consumer demand uncertainty. If a consumer return policy is implemented, we further consider return uncertainty. By modeling the optimization objective of the risk averse MC fashion brand via a mean-variance approach, we derive the closed-form optimal solution under each case. We then conduct both analytical and numerical sensitivity analyses. For the scenario with full refund and return, we reveal the analytical conditions under which the optimal retail price and the optimal number of options available for customization (called the “optimal modularity level”) vary monotonically with respect to the salvage value and the return service charge. For the scenario when there is no refund and return, we show that the optimal retail price and the optimal modularity level are decreasing in the MC fashion brand's degree of risk aversion, the demand uncertainty, and the price-demand sensitivity coefficient. In addition, our numerical analysis indicates that whether the risk averse MC fashion brand would prefer offering consumer return with full refund to no return depends heavily on the demand-return correlation (DRC) parameter.

A credible compliance enforcement system for the climate regime

The compliance enforcement system of the Kyoto Protocol provides only weak incentives for Parties to comply with their commitments. For example, the penalties for non-compliant countries are not legally binding, and moreover, there is no second-order punishment for those countries that fail to implement them. Thus, a Party can simply refuse to comply without consequence. The alternative compliance enforcement systems that have been proposed in the literature also face substantial problems. A simple, flexible, potent, and credible compliance enforcement system for a post-Kyoto climate agreement, based on deposits, is proposed here: at ratification, each country deposits a significant amount of money, and continues to do so in the preparation stage each year until the start of the commitment period. At the end of this period, those countries that meet their emissions limitation targets receive a full refund of their deposit, while those that fail to do so forfeit part or all of it. A simplified two-country model of the deposit system and a numerical example of an agreement involving the US, Japan, Russia, and Europe is also provided. If each country's deposit is no less than its abatement costs, there is a strong incentive for participating countries to avoid non-compliance.

Mitigating Hold-Up Through Complementarities and Refundability

Many valuable composite goods or property rights exist only by assembling multiple, monopoly-supplied components. Since a monopolist exclusively owns each component, hold-up by the last seller can result. First I design a model to show how sunk cost explains this assembly problem. Then I consider two factors that reduce sunk cost, determining conditions for which each mitigates hold-up. Specifically, I implement varied degrees of complementarities and levels of refundability of the component goods. No known previous research examines the assembly problem in terms of sunk cost or considers refunds, and little research models imperfect complementarities. I show if at least the first component purchased has stand alone value, hold-up is mitigated under any refund level. However, if only the last component purchased has stand alone value, averting hold-up depends on capacity constraints, degree of complementarities, price discrimination, and level of refund. Regardless of the degree of complementarities, full refunds prevent hold-up, while zero and partial refunds do not. Welfare analysis reveals conditions for a first or second mover advantage and when sellers endogenously choose a partial or full refund. This research offers settings when degrees of complementarity and refundability reduce sunk cost, often enough to prevent hold-up. My results also suggest policies to overcome inefficiencies in assembling property rights or component goods, such as legal requirements on full refunds, regulation on the order in which components must be purchased, and price discrimination prohibition.

The impact of customer returns on competing chains

Returning products by customers is a common phenomenon and is a concern of many industries, especially the retailing industry. We investigate decisions on prices and production quantities for two supply chains competing in a common market facing customer returns and examine the impact of customer returns on the profitability of two chains under two common competition games: Bertrand-Nash and Stackelberg. By assuming that two chains face two forms of customer returns that are proportional to sales and that increase with the retail price, we compare the distinct impacts of the two forms of customer returns on pricing and production quantity decisions under two competition games. We show that customer returns in one chain affect the decisions of not only this chain but also its competitor’s chain, and that two chains have different responses to different forms of customer returns. We also find that under some circumstances, offering a full refund customer returns policy is a better choice as compared to not allowing customer returns. We illustrate these results with numerical examples.

On A Passé Defense: Unjust Enrichment and the Recovery of Overpaid Taxes

A producer pays commodity taxes on sold goods, realizing only later that the tax was unlawful. Yet, his claim for refund is denied. Tax authorities in the U.S. and elsewhere use the “passing on defense” to deny refunds of unlawfully levied taxes. The defense states that some or all of the unlawful tax the producer paid was passed on to consumers through the price of goods, and thus the producer would be enriched if refunded fully. The passing on defense is largely perceived in legal scholarship as a choice between unjustly enriching the producer by a full refund and unjustly enriching government by denying it. A balance is thus called for, e.g., by applying equity considerations. This paper shows that a full refund of overpaid taxes never enriches the producer-taxpayer. Since the defense does not serve to prevent producers’ enrichment, it should be rejected. Further, the paper demonstrates that, in fact, the passing on defense generates an additional implicit tax in the market.

Coordination of a supply chain with consumer return under demand uncertainty

This paper investigates coordination of a supply chain consisting of one manufacturer and one retailer facing consumer return. We integrate consumer returns policy and manufacturer buyback policy within a modeling framework and explicitly model the positive effect of refund amount on demand and its negative effect on the probability that consumers keep the products. We design a buyback/markdown money contract to coordinate the supply chain under partial refund policy and find that the refund amount plays an important role in the decisions and profitability of the players. In the coordinated setting with given buyback price, the refund amount first increases the players’ expected profits/quantity, and then decreases them. When the risk (variance) of the consumer's valuation increases, the manufacturer may raise the unit wholesale price to achieve a higher unit profit. The supply chain is better off using full refund policy if the risk is very small; otherwise, the supply chain prefers no returns policy. The results of this paper are robust to distribution form.

Taux de couverture vaccinale contre la grippe en France en 2007–2008 : apport des données de remboursement du régime général

IntroductionThe French general health insurance scheme has implemented a national influenza vaccination program including full refund for those 65 years old or more and those under 65 years of age with a targeted chronic disease. ObjectivesOur aim was to evaluate vaccination coverage (VC) according to sex, age, targeted chronic disease and geographical regions. MethodsData on vaccination refund for patients covered by the general health insurance scheme (85% of French population) was collected from the refund information system for the 2007–2008 campaign. ResultsAmong the 11,618,719 targeted individuals, the overall VC was 51.5% (9.6% for individuals <10 years of age, 15.0% between 10 and 19, 28.1% between 20 and 64, and 63.3% for 65 individuals years of age or more). For those under 20 years of age, VC rates were inferior to 35% for targeted groups except for cystic fibrosis (67%). Among individuals 65 years of age or more, VC was 63.3%. The VC was 74.1% for people 65 years old or more with at least five refunds 6-months before vaccination (80% of the group) and for the others it was under 30%. The frequency of refund, vaccination for the 2006/2007 campaign, and having an attending physician were associated with an increased VC. ConclusionRefund data is useful to determine and understand VC among target groups, to build specific strategies among those groups and to assess their impact. VC could be underestimated because some target individuals may be vaccinated through non-refundable procedures. Specific studies should improve the understanding of vaccination attitudes in targeted groups.

Unite calls for full refund of £76 NMC fee

Unite calls for full refund of £76 NMC fee

Editorial

Editorial

How To Advance Open International Scientific Exchange

How To Advance Open International Scientific Exchange

Simultaneous versus sequential public good provision and the role of refunds — An experimental study

We experimentally study contributing behavior to a threshold public good under simultaneous and sequential voluntary contribution mechanisms and investigate how refund policies interact with the mechanism. We find that, for a given refund rule, efficiency is greater under a sequential contribution mechanism than under a simultaneous contribution mechanism. Furthermore, for a given order of contributions, we find that full refund unambiguously achieves higher efficiency in the simultaneous mechanism while this is not the case in the sequential mechanism.

Refunds and collusion in service industries

This paper investigates industry-wide agreements on joint refund policies, and how they influence price competition. We compute the profit of fully-colluding, competing, and semicolluding service providers who offer refunds to those consumers who do not show up at the time of service. Our main findings are that both a monopoly serving all consumer types, and semicollusive service providers offer full refunds. In contrast, competing service providers offer only partial refunds. Finally, refund policies are investigated under moral hazard behavior.

On a Passe Defense: Unjust Enrichment and the Recovery of Overpaid Taxes

AA producer pays commodity taxes on sold goods, realizing only later that the tax was unlawful. Yet, his claim for refund is denied. Tax authorities in the U.S. and elsewhere use the on to deny refunds of unlawfully levied taxes. The defense states that some or all of the unlawful tax the producer paid was passed on to consumers through the price of goods, and thus the producer would be enriched if refunded fully. The passing on defense is largely perceived in legal scholarship as a choice between unjustly enriching the producer by a full refund and unjustly enriching government by denying it. A balance is thus called for, e.g. by applying equity considerations. Accordingly, the application of the defense is vague and inconsistent. This paper shows that a full refund of overpaid taxes never enriches the producer-taxpayer. Since the defense does not serve to prevent producers' enrichment, it should be rejected. Further, the paper demonstrates that, in fact, the passing on defense generates an additional implicit tax in the market.

Hearing aid outcomes with open- and closed-canal fittings

Hearing aid outcomes with open- and closed-canal fittings

The newsboy problem with resalable returns: A single period model and case study

We analyze a newsboy problem with resalable returns. A single order is placed before the selling season starts. Purchased products may be returned by the customer for a full refund within a certain time interval. Returned products are resalable, provided they arrive back before the end of the season and are undamaged. Products remaining at the end of the season are salvaged. All demands not met directly are lost. We derive a simple closed-form equation that determines the optimal order quantity given the demand distribution, the probability that a sold product is returned, and all relevant revenues and costs. We illustrate its use with real data from a large catalogue/internet mail order retailer.

Money back guarantee II: the solution

Money back guarantee II: the solution

Lucky Man: A Memoir • The Day I Went Missing

Lucky Man: A Memoir • The Day I Went Missing

Exploring the Political Economy of Consumer Legislation: The Development of Automobile Lemon Laws

Between 1982 and 1994 all fifty states enacted new car warranty legislation commonly known as ‘lemon laws’. These statutes provide that a consumer who buys a lemon (defined as ‘a chronically defective new car that cannot be repaired with a reasonable effort’) is entitled to receive a replacement car or full refund from the car's manufacturer. We ask why these laws were enacted, exploring both economic and political rationales. The analysis demonstrates that reasonable economic arguments can be advanced for the legislation, both pro and con, and concludes that the legislation resulted most directly from an alliance of consumer advocates and automobile dealers at the expense of manufacturers. This case study illustrates the interplay of legal, political, and economic factors that shape consumer legislation generally.

Exploring the Political Economy of Consumer Legislation: The Development of Automobile Lemon Laws

Between 1982 and 1994 all fifty states enacted new car warranty legislation commonly known as 'lemon laws'. These statutes provide that a consumer who buys a lemon (defined as 'a chronically defective new car that cannot be repaired with a reasonable effort') is entitled to receive a replacement car or full refund from the car's manufacturer. We ask why these laws were enacted, exploring both economic and political rationales. The analysis demonstrates that reasonable economic arguments can be advanced for the legislation, both pro and con, and concludes that the legislation resulted most directly from an alliance of consumer advocates and automobile dealers at the expense of manufacturers. This case study illustrates the interplay of legal, political, and economic factors that shape consumer legislation generally.