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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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    10. 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.
    11. 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.
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    19. 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.
    20. 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).
    21. 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.
    22. Suvadarshini, Pinakhi & Biswas, Indranil & Srivastava, Samir K., 2023. "Impact of reverse channel competition, individual rationality, and information asymmetry on multi-channel closed-loop supply chain design," International Journal of Production Economics, Elsevier, vol. 259(C).

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