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Product returns, asymmetric information, and firm performance

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  • Yan, Ruiliang
  • Cao, Zixia

Abstract

There has been a scarcity of research that studies the value of product return information to supply chain firms. In this research, we assume that the online retailer has the product return information but the manufacturer does not. Our results show that a two-part price contract can motivate the online retailer to share its private information only under certain condition, but the revenue sharing contract plus profit split mechanism always is a valuable strategy to be utilized to seek sharing the online retailer's private information and create a Pareto result. Particularly when the product is highly compatible with online sales, the manufacturer has a strong motivation to seek sharing the online retailer's information. A follow-up empirical study investigates what information can be used to predict product returns and is valuable to be shared with the manufacturer. Through sharing the product return information, both the manufacturer and the online retailer can achieve a higher performance.

Suggested Citation

  • Yan, Ruiliang & Cao, Zixia, 2017. "Product returns, asymmetric information, and firm performance," International Journal of Production Economics, Elsevier, vol. 185(C), pages 211-222.
  • Handle: RePEc:eee:proeco:v:185:y:2017:i:c:p:211-222
    DOI: 10.1016/j.ijpe.2017.01.001
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    7. Liu, Zhenyuan & Han, Shuihua & Li, Chao & Gupta, Shivam & Sivarajah, Uthayasankar, 2022. "Leveraging customer engagement to improve the operational efficiency of social commerce start-ups," Journal of Business Research, Elsevier, vol. 140(C), pages 572-582.
    8. Xu, Xun & Jackson, Jonathan E., 2019. "Investigating the influential factors of return channel loyalty in omni-channel retailing," International Journal of Production Economics, Elsevier, vol. 216(C), pages 118-132.
    9. Qi Chen & Qi Xu, 0. "Joint optimal pricing and advertising policies in a fashion supply chain under the ODM strategy considering fashion level and goodwill," Journal of Combinatorial Optimization, Springer, vol. 0, pages 1-31.
    10. Wen, Xin & Choi, Tsan-Ming & Chung, Sai-Ho, 2019. "Fashion retail supply chain management: A review of operational models," International Journal of Production Economics, Elsevier, vol. 207(C), pages 34-55.
    11. Zhang, Qiao & Chen, Jing & Chen, Bintong, 2021. "Information strategy in a supply chain under asymmetric customer returns information," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 155(C).
    12. Li, Wei & Chen, Jing & Chen, Bintong, 2018. "Supply chain coordination with customer returns and retailer's store brand product," International Journal of Production Economics, Elsevier, vol. 203(C), pages 69-82.
    13. Biswajit Sarkar & Bikash Koli Dey & Mitali Sarkar & Ali AlArjani, 2021. "A Sustainable Online-to-Offline (O2O) Retailing Strategy for a Supply Chain Management under Controllable Lead Time and Variable Demand," Sustainability, MDPI, vol. 13(4), pages 1-26, February.
    14. Lin, Jiaxin & Zhang, Juliang & Cheng, T.C.E., 2020. "Optimal pricing and return policy and the value of freight insurance for a retailer facing heterogeneous consumers with uncertain product values," International Journal of Production Economics, Elsevier, vol. 229(C).
    15. Raj, Alok & Modak, Nikunja Mohan & Kelle, Peter & Singh, Bharati, 2021. "Analysis of a dyadic sustainable supply chain under asymmetric information," European Journal of Operational Research, Elsevier, vol. 289(2), pages 582-594.
    16. Li, Guo & Li, Lin & Sethi, Suresh P. & Guan, Xu, 2019. "Return strategy and pricing in a dual-channel supply chain," International Journal of Production Economics, Elsevier, vol. 215(C), pages 153-164.
    17. Wang, Chong & Chen, Jing & Chen, Xu, 2017. "Pricing and order decisions with option contracts in the presence of customer returns," International Journal of Production Economics, Elsevier, vol. 193(C), pages 422-436.
    18. Duong, Quang Huy & Zhou, Li & Meng, Meng & Nguyen, Truong Van & Ieromonachou, Petros & Nguyen, Duy Tiep, 2022. "Understanding product returns: A systematic literature review using machine learning and bibliometric analysis," International Journal of Production Economics, Elsevier, vol. 243(C).
    19. Khouja, Moutaz & Ajjan, Haya & Liu, Xin, 2019. "The effect of return and price adjustment policies on a retailer’s performance," European Journal of Operational Research, Elsevier, vol. 276(2), pages 466-482.

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