Partial Refund Research Articles

Selling with Money‐Back Guarantees: The Impact on Prices, Quantities, and Retail Profitability

In this paper, we consider a retailer adopting a “money‐back‐guaranteed” (MBG) sales policy, which allows customers to return products that do not meet their expectations to the retailer for a full or partial refund. The retailer either salvages returned products or resells them as open‐box items at a discount. We develop a model in which the retailer decides on the quantity to procure, the price for new products, the refund amount, as well as the price of returned products when they are sold as open‐box. Our model captures important features of MBG sales including demand uncertainty, consumer valuation uncertainty, consumer returns, the sale of returned products as open‐box items, and consumer choice between new and returned products and possibility of exchanges when restocking is considered. We show that selling with MBGs increases retail sales and profit. Furthermore, the second‐sale opportunity created by restocking returned products enables the retailer to generate additional revenues. Our analysis identifies the ideal conditions under which this practice is most beneficial to the retailer. Offering an MBG without restocking increases the new product price. We show that if the retailer decides to resell the returned items as open‐box, the price of the new product further increases, while open‐box items are sold at a discount. On the other hand, customers enjoy more generous refunds along with lower restocking fees. The opportunity to resell returned products also generally decreases the initial stocking levels of the retailer. Our extensive numerical study substantiates the analytical results and sharpens our insights into the drivers of performance of MBG policies and their impact on retail decisions.

Risk-sharing or refund programs in assisted reproduction: a committee opinion

Risk-sharing fee structures in assisted reproduction programs charge patients a higher initial fee but provide a partial refund if treatment fails. This opinion of the ASRM Ethics Committee analyzes the ethical issues raised by these fee structures, including patient selection criteria, conflicts of interest, and patient-informed consent. This document replaces the document of the same name, last published in 2004 (Fertil Steril 2004;82:S249-50).

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.

European Public Health News * President's column * EUPHA office--EUPHA Sections * EUPHA Members 2011 * MARK YOUR CALENDARS!

In this section of the EJPH , we are pleased to report on European public health. The regular contributions of WHO/EURO and the European Commission are unfortunately missing, as we forgot to communicate the deadline to them. We apologize for this. This section focuses on EUPHA (president's column, EUPHA office column and our 2011 list of members) and the European Public Health Conference. # President's column {#article-title-2} Since the definition of the structures of most European health systems after the Second World War, health costs have been increasing steadily. With regard to European countries, the main factors on which responsibility for this trend is blamed are demographic changes leading to population ageing (with increased co-morbidity), advances in technology with introduction of increasingly expensive equipment, and growing expectations on the part of the population on the efficiency and the quality of care. It is therefore not surprising that cost containment figures prominently in the agenda of health care policymakers. The first consequence of cost pressures is indeed the increase in health care institutions’ deficits; other common consequences are also purely financial, with no significant impact on health-care delivery itself, e.g. partial refunds from health-care providers and/or the pharmaceutical industry to health insurance funds or the government, or reductions in physician fees. However, increase of out-of-pocket payments has today become the most widely employed measure to address increased costs, which has been considered one of the most worrying trends in European health-care policy of the last two decades, because of its impact on access to health care. Out-of-pocket payments increase the exposure of households to financial losses associated with health care, preventing which should be one of the main goals of health systems. Lastly, direct effects on the level of care are reported increasingly often: in recent years, waiting times for a number of services increased …

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.

Service Cancellation and Competitive Refund Policy

Although previous research demonstrates the profitability of partial refund policies in a monopoly setting, there is a certain lack of ubiquity in practice about these refunds in competitive service markets. This raises the question of how a partial refund policy may work and whether it is even sustainable in a competitive environment. This study investigates how competition may influence the profitability and the equilibrium choice of refund policies. It is shown that partial refunds may endogenously change the nature of strategic interaction between service providers from local monopolies into a competition regime, which moderates the gains from exploiting the efficiency-enhancing effect of partial refunds. A whole range of pure-strategy equilibria can be obtained as a result of the interplay between the efficiency-improving and the competition-intensifying effects. When the capacity is small (large) such that the efficiency-improving (the competition-intensifying) effect is dominant, both firms in equilibrium follow identical partial (zero) refund policies. Moreover, interestingly, the symmetric firms may end up in an asymmetric equilibrium in which one firm follows a partial refund policy and the other adopts a zero refund policy.

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.

Analysis and design of returns policies from a supplier's perspective

This paper considers the problem of designing a returns policy in a supply chain from a supplier's perspective. The supply chain considered here is assumed to have one supplier and one retailer who serves a random demand of a product with a short life cycle. The retailer can return all the unsold products to the supplier with a partial refund. We found that if the retailer behaviour is rational, that is, ordering the optimal quantity to maximize its expected profit, then both retailer and supplier could benefit from the returns policy. Furthermore, we established that the optimal buyback price is independent of the mean of the random demand, but the variance of the demand has a significant impact on setting the optimal buyback price. The higher the variance the higher the optimal buyback price and the larger the profit gain of both parties. Numerical studies are employed to help understand the benefits of returns policies for the supplier, the retailer, and the whole supply chain.

Containing the Individual Burden of Property Taxes: A Case Study of Circuit Breaker Expansion in Maine

While the median burden of property taxes in Maine is about four percent of income, the distribution across households is highly skewed. Households with the highest burden of property taxes are eligible for partial refunds through a "circuit breaker" program, which was expanded in 2005. Our aim in this study is to understand better the burden of property taxes on Maine resident homeowners—both before and after their circuit breaker refunds. We estimate that the percentage of resident homeowners with a net property tax burden over six percent of their income would decrease from 33 percent of households (with no refunds) to 11 percent of households if all eligible households applied.

Global multiproduct production–Distribution planning with duty drawbacks

AbstractDuty drawback refers to a full or partial refund of paid import duties when an imported merchandise is destroyed, exported, or consumed as a raw material to produce an export. Despite their extensive international trading operations, many manufacturers fail to save costs by claiming duty drawbacks. In the United States alone, estimates of unclaimed duty drawbacks range from US$1.5–10 billion per annum. In light of this hefty sum of unclaimed duty drawbacks, it is astounding that only one existing production–distribution model in the literature has attempted to include duty drawback. This article is the first to address this neglect of duty drawback in supply chain research by industry practitioners and academicians. To this end, it introduces the key concepts of duty drawback and explains its importance in the new economic era. Second, it presents a linear programming model incorporating three key regulatory factors—corporate taxes, import duties, and duty drawbacks—for solving a production–distribution problem in the chemical industry. Finally, through illustrative examples, it demonstrates the importance of incorporating duty drawback and other regulatory factors in production–distribution planning models. © 2005 American Institute of Chemical Engineers AIChE J, 2006

Using science for decision making: The chula vista bayfront local coastal program

Consumer return rates have been steadily rising in recent years, resulting in growing costs for retailers who must manage the returns process and the disposition of returned products. This cost pressure is driven in part by extremely generous return policies, such as giving consumers a full refund upon return. Interestingly, this common retail practice of full refunds is inconsistent with the recommendations of many analytical models of returns, which nearly always show that a partial refund is optimal. Such inconsistencies between theory and practice might arise when the decision drivers included in the analytical models do not match the decision drivers in practice. It might also be the case that retailers are overly optimistic about the value that consumers assign to a full refund, and thus assume that the value of such a policy outweighs its costs. In this paper, we use data collected from eBay, where identical products are sold with different return policies, to investigate these open questions in the literature. We analyze both the return policy drivers from the retailer's perspective and the return policy value from the consumer's perspective. Our results suggest that the value of a full refund policy to consumers may not be as large as one might expect, and it also exhibits a large heterogeneity across buyers with different levels of online purchase experience. In addition, we provide empirical evidence for what has long been suspected by online retailers – that a non-refundable forward shipping charge quickly erodes any value that consumers assign to return policies. The generality of our results is limited by the fact that eBay differs from traditional retail contexts in many respects, including the fact that eBay buyers may not be representative of the general buyer population. However, our study of how eBay consumers value free returns provides new insights into an understudied area, and it can serve as a starting point for future studies of the value of return policies in other retail contexts.