Returns policy, new model introduction, and consumer welfare

Kenji Matsui

International Journal of Production Economics, 2010, vol. 124, issue 2, 299-309

Abstract: This paper investigates how economic outcomes differ for new model introduction between two extreme contracts: outright sales contract and returns policy contract with full credit. Under the outright sales contract, we show that the retailer's incentive to introduce a new model can lead to a reduction of consumer welfare when the retailer is moderately risk averse. The primary conclusion from this study is that the returns policy contract resolves this conflict between firms and consumers, and that the supply chain introduces the new model only when consumer surplus from the new model is higher than that from the old model.

Keywords: Economics; Returns; policy; Supply; chain; Consumer; welfare (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (9)

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