Return Policy: How Endowment Effect Improve the Effectiveness of Return Policy

The influence of return policies on consumers’ behaviour is significant when determining the success of the guidelines. Lenient return policies ensure consumers’ rights after purchase behaviour, so they may be more enthusiastic about repurchasing or choosing not to return. The behavioural economic theory, the endowment effect, suggests that consumers may find themselves less determined to make the return decision as time goes by. This is because people are more likely to give the objects they own a higher value. This reviewed article investigated how the endowment effect triggered by return policies manipulates consumers’ behaviours and how the strength of the endowment effect is changing due to influence from three dimensions (time, financial refunds, effort). Implications from the analysis can give potential to businesses when making return policies. The key purpose of structuring suitable return policies is to raise aggregate consumption by adopting lenient return policies in different dimensions.