Unlocking the return insurance puzzle in e-commerce: A strategic dance between e-sellers and the e-platform
Chen Zhang, Ayatulloh Michael Musyaffi, Baogui Xin, Baogui Xin, Baogui Xin
TL;DR
This paper explores how return insurance affects e-commerce strategies, showing how it impacts pricing and profits for sellers and platforms.
Contribution
The study introduces eight game models to analyze optimal return insurance policies in a competitive e-commerce setting.
Findings
Retailers adjust premiums and return strategies based on commission rates, compensation, and return rates when the platform doesn't offer return insurance.
Retailers can lower prices to influence consumer decisions on return insurance when the platform doesn't provide it.
Platform-provided return insurance can reduce profits for high-quality sellers and the platform itself.
Abstract
As return insurance has become a prevalent strategy, understanding the influences of the return insurance remains a critical question. This study considers a supply chain comprising an e-platform and two competing e-sellers with different product qualities under a commission contract. Eight duopoly game models were constructed to uncover optimal return insurance policies and their influences for e-sellers and the e-platform, considering the customer heterogeneity. Several key findings emerge:1) When the e-platform does not offer return insurance, retailers determine the size of the premium and choose the optimal return strategy based on a combination of the premium, the commission rates, the return compensation, and the return rate; 2) When the e-platform does not offer return insurance, retailers can lower their prices to encourage consumers to decide whether or not to purchase return…
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Taxonomy
TopicsSupply Chain and Inventory Management · Consumer Market Behavior and Pricing · Consumer Retail Behavior Studies