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Returns Policies and Retail Price Competition

12 Pages Posted: 3 Feb 2004  

Paddy Padmanabhan

INSEAD

Ivan P. L. Png

National University of Singapore (NUS)

Date Written: January 2004

Abstract

We show that returns policies increase manufacturer profitability by attenuating price competition between retailers. This effect holds only in the presence of end-user demand uncertainty. The conditions under which a returns policy raises the manufacturer's profit are weaker when retailing is a duopoly than when retailing is a monopoly. This suggests that returns policies serve both to dampen competition and resolve demand uncertainty.

Keywords: Channels, returns, competition, pricing

JEL Classification: D43, D83, L13, M30

Suggested Citation

Padmanabhan, Paddy and Png, Ivan P. L., Returns Policies and Retail Price Competition (January 2004). Available at SSRN: https://ssrn.com/abstract=493162 or http://dx.doi.org/10.2139/ssrn.493162

Paddy V. Padmanabhan

INSEAD ( email )

Boulevard de Constance
Fontainebleau, 77305
France

Ivan P. L. Png (Contact Author)

National University of Singapore (NUS) ( email )

Singapore, 117543
Singapore
+65 6516-6807 (Phone)

HOME PAGE: http://sites.google.com/site/iplpng/

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