Robust Pricing with Refunds

Toomas Hinnosaar and Keiichi Kawai

No 563, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: We characterize a selling mechanism that is robust to the seller’s uncertainty about the buyer’s signal structure. We show that by offering a generous refund policy, the seller can significantly reduce this type of uncertainty and regain market power. A simple mechanism that combines a generous refund policy and random non-refundable discounts achieves the best guaranteed-profit among all possible mechanisms.

Keywords: optimal pricing; robustness; return policies; refunds; monopoly; informa tion design; mechanism design (search for similar items in EconPapers)
JEL-codes: C79 D42 D82 (search for similar items in EconPapers)
Pages: pages 25
Date: 2018
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Related works:
Journal Article: Robust pricing with refunds (2020)
Working Paper: Robust Pricing with Refunds (2020)
Working Paper: Robust Pricing with Refunds (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:563

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