Leasing and selling: optimal marketing strategies for a durable goods firm
Management Science
Information Systems Research
Selling and Leasing Strategies for Durable Goods with Complementary Products
Management Science
Managing New and Remanufactured Products
Management Science
Do Returns Policies Intensify Retail Competition?
Marketing Science
Optimal Prices and Trade-in Rebates for Durable, Remanufacturable Products
Manufacturing & Service Operations Management
Manufacturing & Service Operations Management
Structural Properties of Buyback Contracts for Price-Setting Newsvendors
Manufacturing & Service Operations Management
Equilibrium Returns Policies in the Presence of Supplier Competition
Marketing Science
Optimal Reverse Channel Structure for Consumer Product Returns
Marketing Science
Managing Consumer Returns in a Competitive Environment
Management Science
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Many durable products with relatively short selling seasons have been using returns policies between manufacturers and retailers as the contractual protocol for some time. Recently, these sectors have witnessed the growing popularity of peer-to-peer Web-based used goods markets as important transaction channels between buyers and sellers. Given that these two issues are critically linked from both supply and demand perspectives, in this paper we study the role that consumer valuation of used products plays in shaping a manufacturer's incentive to offer a returns policy option to a retailer when used goods might be devalued compared to new ones as a result of physical deterioration or obsolescence. We do so through a two-period dyadic channel framework where the retailer faces uncertain demand for a durable product from a renewable set of customers who are impatient but forward looking. The manufacturer, on the other hand, needs to decide whether or not to offer a returns contract to the retailer. We first characterize the necessary and sufficient condition under which a returns contract is the equilibrium strategy as well as the corresponding channel decisions. Further analysis of this condition reveals that a higher consumer valuation of used products increases the likelihood of a returns contract being the equilibrium strategy. This result seems to be robust except when the potential demands for the two periods are quite deterministic and uncorrelated. However, it contradicts the burgeoning managerial trend to replace returns contracts with price-only ones in sectors where used goods are valued relatively highly by the consumers. We also discuss how used goods markets affect the equilibrium channel decisions as well as how demand uncertainty and logistics costs associated with returns influence the equilibrium contracting strategy.