Consumer Search and Product Returns in E-Commerce
Williams, Cole Janssen, Maarten
Consumer Search and Product Returns in E-Commerce - American Economic Journal: Microeconomics 2024 - 387-419
E-commerce has led to a surge in products being returned after purchase. We analyze product returns as resulting from a trade-off between the social waste of returns and the search efficiency gains of being able to inspect a product's value after purchase. We find whenever returns are efficient, the market generates too few returns, as the parties involved in the transaction do not internalize the welfare benefit of consumers continuing their search, generating profits for other firms. We also show, despite their consumer-friendly appearance and the private cost of returns, firms may benefit and capture the gains from less costly search.
1945-7669
Communication
Consumer Economics: Theory, Firm Behavior: Theory, Search
Information and Knowledge
Learning
Belief
Economics
Consumer Search and Product Returns in E-Commerce - American Economic Journal: Microeconomics 2024 - 387-419
E-commerce has led to a surge in products being returned after purchase. We analyze product returns as resulting from a trade-off between the social waste of returns and the search efficiency gains of being able to inspect a product's value after purchase. We find whenever returns are efficient, the market generates too few returns, as the parties involved in the transaction do not internalize the welfare benefit of consumers continuing their search, generating profits for other firms. We also show, despite their consumer-friendly appearance and the private cost of returns, firms may benefit and capture the gains from less costly search.
1945-7669
Communication
Consumer Economics: Theory, Firm Behavior: Theory, Search
Information and Knowledge
Learning
Belief
Economics