Impact of Refund Policy on Sales of Paid Information Services: The Moderating Role of Product Characteristics

Abstract

There has been a proliferation of online knowledge-sharing services such as Quora and StackOverflow. While knowledge-sharing is typically free, some platforms (e.g., Zhihu.com) recently started to offer paid information services. Although prior studies have explored the impact of financial incentives on the supply (e.g., quantity and quality) of free knowledge-sharing, it remains unclear what affects the demand for paid information services. In this paper, we examine the effect of enabling product returns on the sales of paid information services. Using data collected from Zhihu, the largest knowledge platform in China, we find that enabling product returns has a positive effect on the demand for paid information services. However, enabling product returns has differential effects on early vs. late sales, sales of utilitarian vs. hedonic topics, as well as on the sales of information services with high vs. low perceived quality. Specifically, enabling product returns has a negative effect on early sales but a positive effect on late sales, which is surprising because early buyers face greater risk regarding service quality than late buyers, due to the absence of quality signals such as reviews in the early stage. Next, enabling product returns is more effective for utilitarian information services than for hedonic ones. Moreover, enabling product returns is more effective for information services with lower perceived quality. Our findings offer fresh insights into the demand for paid information services and have important implications for knowledge-sharing platforms and knowledge contributors.

Keywords: information services, refund policy, hedonic, utilitarian, perceived quality