 Optimal Returns Policy under Demand UncertaintyHaresh Gurnani, Arun Sharma and Dhruv Grewal Journal of Retailing, 2010, vol. 86, issue 2, 137-147 Abstract: Multiple categories of retail products suffer limited shelf life, demand uncertainty, and, in some cases, long lead times. To provide retailers with an incentive to increase the stocking quantity of such products, manufacturers may offer an option to return unsold items at wholesale or less than wholesale prices. This article extends the additive price-dependent demand model in three ways. First, partial returns are optimal for the manufacturer but do not induce higher stocking quantities compared with when the manufacturer offers no returns. Second, in terms of the effect of investment in demand-enhancing activities, when retailers invest, they set higher resale prices, but an optimal partial returns policy still does not induce higher stocking quantity, whereas when manufacturers invest, the optimal returns policy induces higher stocking quantity. Third, when the manufacturer and retailer have different expectations of demand uncertainty, the retailer's estimate influences the expected profits for both, whereas the manufacturer's estimate has a major impact on its profits only. Keywords: Retailing; Pricing; Returns; Selling effort; Quality/brand building investment (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jouret:v:86:y:2010:i:2:p:137-147 DOI: 10.1016/j.jretai.2010.02.001 Access Statistics for this article Journal of Retailing is currently edited by A. Roggeveen More articles in Journal of Retailing from Elsevier |
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