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Refunds and Collusion

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Author Info
Oz Shy () (WZB - Social Science Research Center Berlin)
Staffan Ringbom () (Department of Economics, Swedish School of Economics)

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Abstract

We characterize the conditions under which industry-wide agreements on refund policies weaken price competition. We identify the conditions under which joint industry proffit increases with the amount of refunds promised to those consumers who cancel a reservation or return a product. We compare it to similar industry configurations when firms set up shipping and handling charges instead of refunds. Finally, we investigate refund policies under moral hazard.

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Publisher Info
Paper provided by Dipartimento di Scienze Economiche "Marco Fanno" in its series "Marco Fanno" Working Papers with number 0001.

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Length: 37 pages
Date of creation: May 2005
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Handle: RePEc:pad:wpaper:0001

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Related research
Keywords: Refunds Partial refunds Collusion on refunds Shipping & handling charges Moral hazard

Find related papers by JEL classification:
L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
M2 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Courty, Pascal & Li, Hao, 2000. "Sequential Screening," Review of Economic Studies, Blackwell Publishing, vol. 67(4), pages 697-717, October.
    Other versions:
  2. Gale, Ian L. & Holmes, Thomas J., 1992. "The efficiency of advance-purchase discounts in the presence of aggregate demand uncertainty," International Journal of Industrial Organization, Elsevier, vol. 10(3), pages 413-437, September. [Downloadable!] (restricted)
  3. Courty, Pascal, 2003. "Ticket Pricing under Demand Uncertainty," Journal of Law & Economics, University of Chicago Press, vol. 46(2), pages 627-52, October.
    Other versions:
  4. Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-75, September. [Downloadable!] (restricted)
  5. Gale, Ian L & Holmes, Thomas J, 1993. "Advance-Purchase Discounts and Monopoly Allocation of Capacity," American Economic Review, American Economic Association, vol. 83(1), pages 135-46, March. [Downloadable!] (restricted)
  6. Staffan Ringbom & Oz Shy, 2004. "Advance booking, cancellations, and partial refunds," Economics Bulletin, Economics Bulletin, vol. 13(1), pages 1-7. [Downloadable!]
  7. Miravete, Eugenio J, 1996. "Screening Consumers through Alternative Pricing Mechanisms," Journal of Regulatory Economics, Springer, vol. 9(2), pages 111-32, March.
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