Consumer Search and Product Returns in E-Commerce

Maarten Janssen and Cole Williams

American Economic Journal: Microeconomics, 2024, vol. 16, issue 2, 387-419

Abstract: E-commerce has led to a surge in products being returned after purchase. We analyze product returns as resulting from a trade-off between the social waste of returns and the search efficiency gains of being able to inspect a product's value after purchase. We find whenever returns are efficient, the market generates too few returns, as the parties involved in the transaction do not internalize the welfare benefit of consumers continuing their search, generating profits for other firms. We also show, despite their consumer-friendly appearance and the private cost of returns, firms may benefit and capture the gains from less costly search.

JEL-codes: D11 D21 D83 L25 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (2)

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DOI: 10.1257/mic.20230040

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