Optimal Information Design of Online Marketplaces with Return Rights

Jonas von Wangenheim

Journal of Political Economy, 2025, vol. 133, issue 9, 3019 - 3043

Abstract: Consumer data increasingly enable online marketplaces to identify buyers’ preferences and provide individualized product information. Buyers, however, fully learn their product value only after contracting, when the product is delivered. I characterize the impact of such ex ante information on buyer surplus and seller surplus, when the seller sets prices and refund conditions in response to the ex ante information. I show that efficient trade and an arbitrary split of the surplus can be achieved. For the buyer-optimal signal, low-valuation buyers remain partially uninformed. Such a signal induces the seller to sell at low prices without refund options.

Date: 2025
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