Warranty Signalling and Reputation
Management Science
Closed-Loop Supply Chain Models with Product Remanufacturing
Management Science
Supply Chain Coordination for False Failure Returns
Manufacturing & Service Operations Management
Service Escape: Profiting from Customer Cancellations
Marketing Science
Reverse Channel Design: The Case of Competing Retailers
Management Science
Probabilistic Goods: A Creative Way of Selling Products and Services
Marketing Science
Manufacturing & Service Operations Management
Service Cancellation and Competitive Refund Policy
Marketing Science
Optimal Reverse Channel Structure for Consumer Product Returns
Marketing Science
Optimal Selling Scheme for Heterogeneous Consumers with Uncertain Valuations
Mathematics of Operations Research
Competition in Consumer Shopping Experience
Marketing Science
Returns Policies Between Channel Partners for Durable Products
Marketing Science
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This paper investigates the pricing and restocking fee decisions of two competing firms selling horizontally differentiated products. We model a duopoly facing consumers who have heterogeneous tastes for the products and who must experience a product before knowing how well it matches with their preferences. The analysis yields several key insights. Restocking fees not only can be sustained in a competitive environment, but also are more severe when consumers are less informed about product fit and when consumers place a greater importance on how well products' attributes fit with their preferences. We compare the competitive equilibrium prices to a scenario in which consumers are certain about their preferences and find conditions defining when consumer uncertainty results in higher equilibrium prices. Comparison to a monopoly setting yields a surprising result: Equilibrium restocking fees in a competitive environment can be higher than those charged by a monopolist. This paper was accepted by Jagmohan S. Raju, marketing.