Searching Online and Product Returns

Maarten Janssen and Cole Williams

No 17958, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: E-commerce has led to a surge in products being returned after purchase. We analyze product returns as resulting from a trade-off between the social waste of returns and the search efficiency gains of being able to inspect a product’s value after purchase. We find that whenever returns are efficient, the market generates too few returns as the parties involved in the transaction do not internalize the welfare benefit of consumers continuing their search, generating profits for other firms. We also show that, despite their consumer friendly appearance and the private cost of returns, firms may benefit and capture the gains from less costly search.

JEL-codes: D40 D83 L10 (search for similar items in EconPapers)
Date: 2023-03
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