Returns Policies and Retail Price Competition
Ivan P. L. Png
National University of Singapore
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.
Number of Pages in PDF File: 12
Keywords: Channels, returns, competition, pricing
JEL Classification: D43, D83, L13, M30
Date posted: February 3, 2004