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Customer return policies for experience goods: the impact of product price and consumer search costs on seller-provided informational cues

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  • Franklin Mixon

Abstract

The present article provides an extension of previous theoretical arguments regarding customer return policies for experience goods. Logit regressions presented here suggest the importance of the 'full cost' to consumers of a purchase mistake, as proxied by experience goods prices and the time costs to consumers associated with search, in the seller's decision to produce information in advertisements regarding return policies. The evidence points out that sellers do respond in their decisions to produce information in a manner that reduces the total cost of voluntary exchange and maximizes seller profits.

Suggested Citation

  • Franklin Mixon, 1999. "Customer return policies for experience goods: the impact of product price and consumer search costs on seller-provided informational cues," Applied Economics, Taylor & Francis Journals, vol. 31(3), pages 331-336.
    • Handle: RePEc:taf:applec:v:31:y:1999:i:3:p:331-336
    DOI: 10.1080/000368499324318
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    References listed on IDEAS

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    1. Che, Yeon-Koo, 1996. "Customer Return Policies for Experience Goods," Journal of Industrial Economics, Wiley Blackwell, vol. 44(1), pages 17-24, March.
    2. Kyle Bagwell & Michael Riordan, 1986. "Equilibrium Price Dynamics for an Experience Good," Discussion Papers 705, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    3. Laband, David N, 1986. "Advertising as Information: An Empirical Note," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 517-521, August.
    4. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-329, March-Apr.
    5. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, April.
    6. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-754, July/Aug..
    7. Stigler, George J., 2011. "Economics of Information," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 5, pages 35-49.
    8. Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
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    Cited by:

    1. Velasco, Franklin & Yang, Zhiyong & Janakiraman, Narayanan, 2021. "A meta-analytic investigation of consumer response to anthropomorphic appeals: The roles of product type and uncertainty avoidance," Journal of Business Research, Elsevier, vol. 131(C), pages 735-746.
    2. Li, Tingting & Xie, Jinxing & Liu, Xin, 2020. "Consumer return policies in presence of a P2P market," Omega, Elsevier, vol. 97(C).
    3. Franklin Mixon & Rand Ressler, 2000. "A Note on Elasticity and Price Dispersions in the Music Recording Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 17(4), pages 465-470, December.
    4. Rachel A. Smith & C. Nicholas McKinney & Steven B. Caudill & Franklin G. Mixon, 2016. "Consumer ratings and the pricing of experience goods: hedonic regression analysis of beer prices," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 4(1), pages 1-10, December.
    5. Robert B. Ekelund & Mark Thornton, 2019. "Extreme Credence and Imaginary Goods," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 47(3), pages 361-371, September.

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