Return Window Decision in A Distribution Channel

This study investigates a firm's return window decision in a distribution channel. Conventional wisdom posits that compared to a centralized channel, a decentralized channel induces worse services (e.g., a shorter return window) because of double marginalization. We build a model consisting of one manufacturer, one retailer, and consumers who are heterogeneous in their willingness‐to‐pay (WTP) for product quality. Counterintuitively, we find that the return window can be longer in a decentralized channel than in a centralized channel. Furthermore, the return window can decrease along with product quality, which means that high‐quality products can be offered shorter return windows than low‐quality products. When endogenizing product quality, we reveal, contrary to previous findings, that the product quality in a decentralized channel may be higher, even when consumer heterogeneity in product quality follows a uniform distribution. This higher product quality induces a decentralized channel to generate a consumer surplus higher than that of a centralized channel.

• Publication year

  2020

• Venue

  Production and operations management

• Publication date

  2020-05-04

• Fields of study

  Business, Economics

• Identifiers
  DOI 10.1111/poms.13201
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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