# Unlocking the return insurance puzzle in e-commerce: A strategic dance between e-sellers and the e-platform

## 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.

## Key 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 insurance by themselves; 3) The e-platform that offers return insurance can change retailers’ return strategy to the detriment of both the high quality e-sellers’ profits and their own revenue.