Refunds and collusion in service industries
AbstractThis paper investigates industry-wide agreements on joint refund policies, and how they influence price competition. We compute the profit of fully-colluding, competing, and semicolluding service providers who offer refunds to those consumers who do not show up at the time of service. Our main findings are that both a monopoly serving all consumer types, and semicollusive service providers offer full refunds. In contrast, competing service providers offer only partial refunds. Finally, refund policies are investigated under moral hazard behavior.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economics and Business.
Volume (Year): 60 (2008)
Issue (Month): 6 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/jeconbus
Refunds Partial refunds Collusion on refunds Moral hazard;
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