Consumer Search and Product Returns

Kinshuk Jerath () and Qitian Ren ()
Additional contact information
Kinshuk Jerath: Marketing Division, Columbia Business School, Columbia University, New York, New York 10027
Qitian Ren: Marketing Division, Shenzhen Finance Institute, School of Management and Economics, The Chinese University of Hong Kong, Shenzhen, Shenzhen 518172, China

Marketing Science, 2025, vol. 44, issue 3, 691-710

Abstract: We study a scenario in which a consumer has uncertain match with a product but can conduct costly prepurchase search to resolve this match. The firm selling the product jointly decides its price and return policy to maximally extract surplus by strategically managing who bears the cost of resolving the match, and when it is resolved. If the consumer’s search cost is low relative to the firm’s return processing cost, the firm induces the consumer to search and bear the cost of resolving the match before making the purchase decision. However, if search cost is high enough, the firm offers a return policy such that match is resolved after the purchase decision and the firm bears the processing cost of an unmatched returned product. By allowing search to be potentially inconclusive, we show that active search and returning may coexist and, in fact, be complementary such that offering a partial-refund return policy can encourage search and more efficient search can result in more returns due to a more lenient return policy. The firm finds it optimal to add restrictive clauses to the return policy along with offering free returns, and the presence of these clauses induces consumers to resolve match by conducting prepurchase search. In addition to providing novel insights into the interplay between search and returns, our model explains a wide range of pricing and return policies used by firms, and associated search and return behaviors of consumers.

Keywords: consumer search; product returns; refund policy; game theory (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1287/mksc.2022.0298 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:44:y:2025:i:3:p:691-710

Access Statistics for this article

More articles in Marketing Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().