Refund Policy Research Articles

Consumer Return Policies in Omnichannel Operations

We study the pricing and return policy decisions of an omnichannel retailer serving customers who differ in how they realize their uncertain valuation for a product -- by inspecting in-store before purchase, or by purchasing online and possibly returning misfit products. Customers may return misfit products either to stores for a full refund or online as per the firm’s return policy. We model prices to be identical across channels, allow cross-channel returns, and endogenize customers’ purchase and return decisions, capturing typical features of an omnichannel setting. Our analysis helps explain why some omnichannel firms choose full refunds while others charge a fee for online returns: We find that omnichannel firms with good salvage partners for online returns (e.g., Nordstrom) as well as those with more store-based customers (e.g., Macy’s) should offer full refunds. Similarly, firms are incentivized to offer full refunds for products that customers are more likely to inspect in-store (e.g., Express for footwear). In contrast, firms with a significant store network and better in-store salvage opportunities (e.g., J.C. Penney) might be better off charging a fee for online returns in order to nudge customers to return in-store. Finally, an omnichannel firm should be cautious both in making the return process more convenient and in improving accessibility to its stores, as these seemingly beneficial policies, if combined with a partial refund policy, could undermine the firm's overall profit.

Written Instructions vs. Audiology Service for PSAP Use

Written Instructions vs. Audiology Service for PSAP Use

Price Adjustment Policy with Partial Refunds

Have you ever purchased an item only to notice a short while later that its price was reduced? Many retailers offer to refund customers the full price difference as long as the discount occurred within a short period of time after the original purchase. Such policy looks attractive to consumers as it shields them from future price fluctuations. But can this policy be advantageous for the retailer?In this paper we investigate the price difference refund policy (commonly referred to as price adjustment) and demonstrate how it can result in a higher profit even if all consumers request and receive a price adjustment.Further, the existing literature and practice both assume that if a price adjustment policy is employed, the consumers should get the full price difference refunded. In this paper we endogenize the refund amount, allowing the retailer to determine the optimal percentage of the price difference to be returned to consumers. We fully characterize the conditions under which it is optimal to offer a partial or greater than full price adjustment to customers as well as the optimal refund percentage. Additionally, we demonstrate that the practice of limiting the price adjustment option to a short period after the purchase incident is not necessarily in the best interest of retailers.

How much do online consumers really value free product returns? Evidence from eBay

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.

Optimal Retail Return Policies with Wardrobing

Many retailers offer refunds to consumers who, after a trial period, return a product that they find does not fit their needs. Some consumers are willing to use this return option opportunistically for short‐term consumption rather than its intended purpose of resolving fit uncertainty. Such behavior has been termed “wardrobing.” Restocking fees (partial refunds) can be used to combat wardrobing. However, there is a trade‐off involved, since partial refunds will be viewed negatively by consumers who return an item due to a true lack of fit. In this study, we consider how the extent of wardrobing (how many consumers consider such behavior) and the benefit of wardrobing (how much value can be extracted during the trial) impact firm pricing decisions and profits in this retail context. Our results imply that an increase in the extent of wardrobing is most detrimental to profits when the current extent of wardrobing is low. On the contrary, if the extent of wardrobing is already very high, and the benefit of wardrobing to consumers is also high, the retailer can set prices and refunds such that additional wardrobing actually increases firm profits. In a model extension, we show how a retailer can effectively screen wardrobers from ordinary consumers by offering a menu of price/refund pairs, and that such an approach can lead to increased profits if the extent of wardrobing is sufficiently high. Overall, our findings provide new insights into how retailers can set prices and refund policies to effectively manage opportunistic behavior by consumers.

Regulatory arbitrage and the FERC rate settlement process

We demonstrate that the Federal Energy Regulatory Commission’s (FERC) regulatory procedures for natural gas pipelines, specifically its rate-refund policy, induces regulatory arbitrage that leads to economic distortions. Specifically, we demonstrate that the rate refund policy causes pipelines effectively to “extort” ratepayers through the addition of economically inefficient capital investment, akin to “gold-plating” investments. We estimate the potential magnitude of this arbitrage impact on ratepayers to be between $400 and $700 million annually. Counterintuitively, however, we demonstrate that the presence of this arbitrage opportunity leads to underinvestment in pipeline capacity, thus negating one of the principal purposes of rate regulation. We further demonstrate that FERC could easily eliminate this regulatory arbitrage by setting the refund interest rate to the pipeline’s as-filed weighted average cost of capital.

Return and refund policy for product and core service bundling in the dual‐channel supply chain

AbstractRecently, manufacturers have increasingly begun to sell products bundled with core services. However, customers are inconvenienced by individually returning the product or refunding the service after they have purchased a bundle. This paper presents a return and refund policy under two‐stage demand uncertainty (uncertainty at time 0 and inherent uncertainty), for products bundled with core services in the dual‐channel supply chain. Consumers can use the direct channel to return the default product–service bundle. In contrast, consumers in the retail channel can unsubscribe from the retailer's diverse core service by first receiving an unused service refund; the retailer then returns the product to the manufacturer. We use an approximate algorithm to solve for the optimal product quantity in the retail channel, demonstrating that the proportional marginal profit has a greater positive influence on the retailer's profit, and especially for the demand with a higher mean and lower variance.

Multi-manufacturer pricing and quality management strategies in the presence of brand differentiation and return policy

In this paper, we consider a supply chain in which multiple manufacturers sell a single product through a common retail channel. The demand at the retailer’s end depends on the retail price and quality of the product. Each manufacturer customizes his/her product to differentiate it from the other manufacturers’ products. Manufacturers compete with each other over price and quality in the presence of brand differentiation. In this set up, we consider two scenarios: (i) when customers do not have the facility of return and refund, and (ii) when customers do have the facility of return and get full refund. We analyze the pricing and quality management strategies of the manufacturers and the retailer in each scenario for centralized and decentralized systems. Through our study we find that brand differentiation increases retail price and quality of the product. We also see that, to make full refund policy more profitable than no return, reservation price has to be set higher. Using revenue sharing mechanism, we coordinate the decentralized system and make it a win-win situation for each party involved. Finally, through a numerical example, we analyze the effect of various parameter-values on the decision making strategies of our model.

Louis Bamberger: Department Store Innovator and Philanthropist by Linda B. Forgosh

Reviewed by: Louis Bamberger: Department Store Innovator and Philanthropist by Linda B. Forgosh Mark Krasovic (bio) Louis Bamberger: Department Store Innovator and Philanthropist. By Linda B. Forgosh. Waltham, MA: Brandeis University Press, 2016. xv + 258 pp. When employees of his ever-expanding department store in Newark served abroad in World War I, Louis Bamberger printed their letters to him in his house organ, Counter Currents, and sent them Christmas care packages and copies of the magazine. Three members of the American Expeditionary Force wrote to thank him for his support of the war effort and for making them feel as though they were still members of the Bamberger family, though thousands of miles away. “Things like these which you—and by this we include the firm and our store also—have done,” they wrote, “make us realize so much more why our store stands first among them all—why we feel proud to be a part of it” (64). The doughboys’ easy blending of commitments to their country and their employer, the person of that employer and the larger institution he built speaks to both the challenges and the promise of writing his biography. As Linda Forgosh explains very early on in her engaging, [End Page 407] accomplished Louis Bamberger: Department Store Innovator and Philanthropist, “he left no business records, kept no diaries, remained a bachelor, and kept his private life and rationales for his business decisions to himself” (2). To build a narrative of his life, Forgosh thus weaves together Bamberger’s press appearances, some scant correspondence, the memories of more than 200 people who worked or shopped at his store, and especially Counter Currents . What emerges is a remarkable portrait of a person without a readily discernible center, someone seen reflected in the institutions he built and other people’s thinking about him rather than in a direct gaze at the man himself. And the promise of a Bamberger biography, one that Forgosh embraces and articulates amidst the enjoyable swirl of detail she has gathered is that in Bamberger—or, rather, around him—we can discern the contours of a thoroughly modern American consumer society, where a rich subject can be constructed out of his publicly circulating products rather than evidence of his essential thoughts and beliefs, his interior being. Bamberger came from a family of dry goods merchants and shopkeepers, German Jews who settled in Baltimore and had built a prosperous business empire by the 1870s. Forgosh embeds this family story in a longer history of American consumption, which, in turn, she interweaves with a longer history of Jewish merchant life, beginning with the itinerant peddlers who, often in the span of a single lifetime, developed their businesses into emporia of mass urban consumption. In 1892, Bamberger, along with two partners (one married to Louis’s remarkable sister Carrie, who certainly deserves a biography of her own) opened a small store on Market Street in Newark, the shelves stocked with merchandise purchased at a steep discount from a bankrupt firm. From there, Bamberger steadily expanded his store until it occupied an entire city block. It grew with its host city’s population, of course, but Forgosh is more interested in how the store shaped that public rather than vice versa. For Bamberger’s, she demonstrates, became a civic institution, a place where people met “under the clock,” window-shopped, imagined a life together, and after perhaps purchasing a home returned to furnish it. The store powerfully shaped the tastes of wide swathes of Newarkers, employed thousands, and pioneered merchant practices that we now take for granted (liberal refund policies, charge accounts, worker training, even the Thanksgiving Day Parade, which Macy’s allegedly stole from Newark, to name but a few). The story of the store’s expansion takes up about half the book, until Bamberger—in a move that is as surprising to the reader as it must have been to Newarkers—sells it to the Straus brothers, for reasons that Forgosh can only (convincingly) guess at, since Bamberger never discussed them beyond saying he got a good deal. [End Page 408] The remaining pages follow Bamberger’s career as the “merchant-prince-as-public-benefactor,” and...

Economic evaluation on tight sandstone gas development projects in China and recommendation on fiscal and taxation support policies

China is rich in tight sandstone gas resources (“tight gas” for short). For example, the Sulige Gasfield in the Ordos Basin and the Upper Triassic Xujiahe Fm gas reservoir in the Sichuan Basin are typical tight gas reservoirs. In the past decade, tight gas reserve and production both have increased rapidly in China, but tight gas reservoirs are always managed as conventional gas reservoirs without effective fiscal, taxation and policy supports. The potential of sustainable tight gas production increase is obviously restricted. The tight gas development projects represented by the Sulige Gasfield have failed to make profit for a long period, and especially tight gas production has presented a slight decline since 2015. In this paper, a new economic evaluation method was proposed for tight gas development projects. The new method was designed to verify the key parameters (e.g. production decline rate and single-well economic service life) depending on tight gas development and production characteristics, and perform the depreciation by using the production method. Furthermore, the possibility that the operation cost may rise due to pressure-boosting production and intermittent opening of gas wells is considered. The method was used for the tight gas development project of Sulige Gasfield, showing that its profit level is much lower than the enterprise's cost level of capital. In order to support a sustainable development of tight gas industry in China, it is recommended that relevant authorities issue value-added tax (VAT) refund policy as soon as possible. It is necessary to restore the non-resident gas gate price of the provinces where tight gas is produced to the fair and reasonable level in addition to the fiscal subsidy of CNY0.24/m3, or offer the fiscal subsidy of CNY0.32/m3 directly based on the on-going gate price. With these support policies, tax income is expected to rise directly, fiscal expenditure will not increase, and gas consumption cost in China will be significantly cut down.

Price Drop Protection Policy with Forward Looking Consumers

Have you ever purchased an item only to notice a short while later that its price was reduced? Many retailers now offer to refund customers the full price difference as long as the price discount occurred within a specified short period of time after the original purchase (e.g. Amazon, Walmart, Neiman Marcus). Such price difference refund policy looks very attractive to consumers as it shields them from future price fluctuations. But can this policy be advantageous for the retailer who has to refund the money if prices drop? Despite the recent popularity of such policies, the existing research on the topic is scarce. In this paper we investigate the price difference refund policy (commonly referred to as price adjustment) and demonstrate how it can improve retailer's profits. We show that contrary to common belief, price adjustment can result in higher profits even if all consumers request and receive the refund.Further, the existing literature and practice both assume that if price adjustment policy is employed, the consumers should get the full price difference back. In this paper we consider a generalized price adjustment policy where we endogenize the refund amount, allowing the retailer to determine the optimal percentage of price difference to be returned to consumers. We fully characterize the conditions under which it is optimal to offer only a partial refund to customers as well as the optimal refund fraction. Additionally, we demonstrate that the practice of limiting the price adjustment option to a short period after the purchase is not necessarily in the best interest of retailers.

Analysis of Municipal Refunding Policies: A 50 Year Historical Approach

The most common tax-exempt fixed-rate bond series structure in the $3.7 trillion US tax-exempt bond market includes callable debt for maturities greater than ten years. The decision as to when to refund (refinance) these bonds to generate interest cost savings is an important one historically manifested by the use of various heuristic criteria. Some municipal issuers codify these criteria and formally adopt them into what is commonly called a refunding policy. In this paper we measure and evaluate the performance of several dozen refunding policies through the lens of history. Using municipal and Treasury yield data dating to 1965, we calculate realized present value savings from various refunding policies under different monetary conditions. Among the dozens of policies examined, a single, new policy stands alone in realizing significantly greater present value savings than any other.

Refund policies for cores with quality variation in OEM remanufacturing

Cores are essential for the remanufacturing business. The lack of cores with proper quality is reported as a highly ranked factor that limits both third party and OEM (Original Equipment Manufacturer) remanufacturers. To encourage the return of quality cores, in practice it is common for OEMs to charge a certain amount of deposit, and refund it fully or partially depending on the quality of cores during the return process. Furthermore, the core quality varies and leads to different remanufacturing costs. The core refund policy should reflect such differences, in order to encourage the customers to return the cores with “correct” quality. In this paper, we propose three refund policies and develop profit maximization model for the remanufacturer. Under the assumption of quality following a uniform distribution, we develop analytical solutions for the refund policies and principles for quality partition. Numerical examples indicate that the customers׳ valuation of core is an important factor influencing the return rates and the economics performance of the system as well. Multiple refund policy with a small number of quality classes already brings major advantages, even with a market where the competition for collecting cores is relatively high. The study is also extended to the cases that core quality follows an adjusted normal distribution. Credit refund policies are also studied for comparison purpose.

Optimal Advance-Selling Strategy for Fashionable Products With Opportunistic Consumers Returns

Advance-selling (AS) is a commonly observed industrial practice in which a retailer allows consumers to prebook the fashionable product before the real selling season starts. Motivated by this practice, this paper studies AS strategy for a retailer who sells a newsvendor-type of fashionable product in light of potential consumer opportunistic returns. In our model, the consumers face valuation uncertainty and know their valuation realization only after product acquisition. There also exists aggregate demand uncertainty, captured in the conventional newsvendor model. All preorders are fulfilled at the beginning of a normal-selling season. We build analytical optimization models and consider three strategic options for the retailer, namely, no advance-selling allowed (NAP), advance-selling with full refund (AFP) and advance-selling with partial refund (APP), where there are two suboptions under APP. We derive the retailer's optimal pricing and refund policies for each option. By comparing the results in the above options, important insights are generated. Finally, we conduct a numerical analysis to further examine the impacts brought by consumers valuation, market condition, and consumers classification on the optimal strategy.

Towards a Better Policy: Analyzing Municipal Refundings Using a Real-World Market Model

In the $3.7 trillion municipal bond market, the timing of a refunding is an important decision: refund too early and the opportunity for greater budgetary benefit may be precluded; refund too late and an attractive rate market may never return. In this paper, we argue that reliance on simple heuristics or even arbitrage-free option models to derive a refunding policy is inappropriate, because hedging exposure to municipal securities is very hard or even impossible for issuers. Instead, we discover and propose a novel, robust municipal refunding policy that maximizes expected present value (EPV) savings under a real-world, history-consistent interest rate model following Deguillame et al (2013). The proposed policy dominates 30 other tested policies in simulation. This real option framework can be used both by issuers to maximize the expected value of their call options, and by investors, to value and manage risk in callable municipal bond holdings.

Refunds as a Metering Device

Firms frequently offer 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 firms offer inefficiently strict terms for refunds, while high-quality firms offer inefficiently 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.

The Impact of EU Export Refunds on the African Continent: An Impact Assessment

The EU’s export refund policy has long been a source of controversy for its perceived impacts on third country markets. However, the EU Commission maintain that these concerns are largely historic as CAP reforms mean that export refunds are now used infrequently. The purpose of this article is therefore to assess the impacts of refunds in the wake of the 2003 reform of the CAP using two complementary analyses: first, an analysis using a computable general equilibrium model and second, two case studies to assess the potential impact of export refunds in selected African developing countries.

52 Association of psychotherapy with long-term disability benefit claim closure among patients disabled due to depression

ObjectivesTo evaluate the effect of psychotherapy for depression in patients receiving disability benefits.MethodsUsing administrative data from a large Canadian, private, disability insurer, we evaluated the association between the provision of...

Optimal order quantity and product modularity for a two-echelon returnable supply chain

This study considers a supply chain consisting of a manufacturer, a retailer, customers and a returnable and modular product with uncertain demand, in which customers return the unsatisfactory products to the retailer, and the retailer returns the unsold products to the manufacturer. We investigate the effects of the manufacturer’s refund for the retailer’s unsold products and the product modularity under the decentralised and the centralised strategies. We confirm that the order quantity and customer’s return probability both affect the optimal modularity level of the product, and that the optimal modularity level is related to the refund policy. Also, a strategic alliance between the supply chain members is more advantageous to product innovation based on modularity for a returnable chain. Finally, managerial insights and remarks are offered.

Linear approximation approach for a stochastic seat allocation problem with cancellation & refund policy in airlines

This study is focused on the seat allocation problem with stochastic demands airlines to determine booking limits by fare classes in airlines. In this paper, we consider the additional constraints such as customers’ booking cancellations and airlines’ refund policy. Our problem can be modeled as a probabilistic non-linear programming model, which is difficult to solve optimally. Applying a linear approximation technique with some assumptions on the demand distribution functions, we can formulate the complex probabilistic non-linear programming model as a simple Integer Linear Programming model. Using randomly generated demands from a simulation program, the model demonstrates that revenue can be increased in a practical and effective manner.