Impact of Refundability on Sales of Digital Knowledge Products: The Moderating Role of Product Characteristics

59 Pages Posted: 25 May 2022 Last revised: 29 Feb 2024

See all articles by Huiyan Chen

Huiyan Chen

University of Connecticut - Department of Operations & Information Management

Hongfei Li

Chinese University of Hong Kong

Jing Peng

University of Connecticut - Department of Operations & Information Management

Ramesh Shankar

University of Connecticut - Department of Operations & Information Management

Date Written: February 26, 2024

Abstract

There has been a proliferation of online knowledge-sharing platforms such as Quora and StackOverflow. While knowledge-sharing is typically free, some platforms (e.g., Zhihu.com and Coursera.org) recently started to offer paid knowledge products. To facilitate the consumption of such products, the host platforms often allow knowledge providers to designate their offerings as refundable. While the existing literature on physical goods suggests that refundability may serve as a positive quality signal, its applicability and impact on digital knowledge products remain unclear, especially given the notable differences between physical and digital goods in terms of processing returns. This study aims to unravel the effect of refundability on the sales of digital knowledge products, and examine how various product characteristics—such as life cycle stage, rating, and functional orientation—moderate this impact. Using data collected from Zhihu, the largest knowledge platform in China, we find that refundability has a positive effect on the demand for digital knowledge products. More importantly, this effect is more pronounced for products that are in their late stages, have lower ratings, or serve utilitarian purposes. We further use an online experiment to explore the underlying mechanisms driving the impact of refundability. Delving into the mediating roles of perceived risk and perceived quality, we reveal that while refundability reduces the perceived risk of knowledge products, it unexpectedly reduces their perceived quality. This result contradicts the common belief that refundability signals high quality, thereby highlighting a unique mechanism at play for digital goods. Our findings offer fresh insights into the effectiveness of refund policy for digital knowledge products and have important implications for knowledge-sharing platforms and knowledge contributors.

Keywords: knowledge products, refundability, hedonic, utilitarian, perceived risk, perceived quality

Suggested Citation

Chen, Huiyan and Li, Hongfei and Peng, Jing and Shankar, Ramesh, Impact of Refundability on Sales of Digital Knowledge Products: The Moderating Role of Product Characteristics (February 26, 2024). Available at SSRN: https://ssrn.com/abstract=4114972 or http://dx.doi.org/10.2139/ssrn.4114972

Huiyan Chen

University of Connecticut - Department of Operations & Information Management ( email )

2100 Hillside Rd
Unit 407
Storrs, CT CT 06269
United States
06269 (Fax)

Hongfei Li

Chinese University of Hong Kong

39439679 (Phone)
999077 (Fax)

HOME PAGE: http://www.bschool.cuhk.edu.hk/staff/li-hongfei/

Jing Peng (Contact Author)

University of Connecticut - Department of Operations & Information Management ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States

Ramesh Shankar

University of Connecticut - Department of Operations & Information Management ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States
860-486-5217 (Phone)
860-486-4839 (Fax)

HOME PAGE: http://www.sramesh.com/

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