Money-Back Contracts with Double Moral Hazard

Duncan P. Mann and Jennifer P. Wissink

RAND Journal of Economics, 1988, vol. 19, issue 2, 285-292

Abstract: We analyze money-back contracts, in which a seller promises to refund some fraction of the buyer's purchase price if an item is returned, as a three-stage game. In a cooperative first stage the players determine a price and refund share. In the second stage they noncooperatively choose inputs. The buyer decides whether to return the item in the final stage. This process economizes on the information necessary to enforce a contract and serves an incentive function when transactions involve double moral hazard. Efficient contracts exist when uncertainty is moderate. Inefficiencies result when there is either insufficient or excessive uncertainty.

Date: 1988
References: Add references at CitEc
Citations: View citations in EconPapers (29)

Downloads: (external link)
http://links.jstor.org/sici?sici=0741-6261%2819882 ... O%3B2-H&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

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:rje:randje:v:19:y:1988:i:summer:p:285-292

Ordering information: This journal article can be ordered from
https://editorialexp ... i-bin/rje_online.cgi

Access Statistics for this article

More articles in RAND Journal of Economics from The RAND Corporation
Bibliographic data for series maintained by ().