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Competing in a supply chain via full-refund and no-refund customer returns policies

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  • Chen, Jing
  • Grewal, Ravneet

Abstract

In this paper, we address the problem in which a manufacturer in a supply chain supplies a product to two competing retailers. Both retailers, facing customer returns, must decide on prices for the product. The manufacturer is a Stackelberg leader in the supply chain and the two retailers decide prices after the manufacturer announces the wholesale price. One retailer is well established, offering a full-refund policy, while the other retailer is a new entrant into the market place. The new entrant retailer needs to decide whether to implement a full-refund policy or a no-refund policy, in order to compete with the well-established retailer under two games: Nash game and Stackelberg game. We show that customer returns policies can be used as competing marketing strategies. Numerical examples are included to illustrate the major results of the paper. The analysis generates insights about how the degree to which the customer accepts the no-refund product affects the new entrant retailer′s choice of customer returns policies in a competitive market.

Suggested Citation

  • Chen, Jing & Grewal, Ravneet, 2013. "Competing in a supply chain via full-refund and no-refund customer returns policies," International Journal of Production Economics, Elsevier, vol. 146(1), pages 246-258.
    • Handle: RePEc:eee:proeco:v:146:y:2013:i:1:p:246-258
    DOI: 10.1016/j.ijpe.2013.07.005
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    References listed on IDEAS

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