When to carry eccentric products? Optimal retail assortment under consumer returns

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• dc.contributor.author Alptekinoglu, Aydmca
• dc.contributor.author Grasas, Àlexca
• dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
• dc.date.accessioned 2017-07-26T10:41:35Z
• dc.date.available 2017-07-26T10:41:35Z
• dc.date.issued 2011-04-01
• dc.date.modified 2017-07-23T02:13:52Z
• dc.description.abstract To understand whether retailers should consider consumer returns when merchandising, we study how the optimal assortment of a price-taking retailer is influenced by its return policy. The retailer selects its assortment from an exogenous set of horizontally differentiated products. Consumers make purchase and keep/return decisions in nested multinomial logit fashion. Our main finding is that the optimal assortment has a counterintuitive structure for relatively strict return policies: It is optimal to offer a mix of the most popular and most eccentric products when the refund amount is sufficiently low, which can be viewed as a form of risk sharing between the retailer and consumers. In contrast, if the refund is sufficiently high, or when returns are disallowed, optimal assortment is composed of only the most popular products (a common finding in the literature). We provide preliminary empirical evidence for one of the key drivers of our results: more eccentric products have higher probability of return conditional on purchase. In light of our analytical findings and managerial insights, we conclude that retailers should take their return policies into account when merchandising.
• dc.format.mimetype application/pdfca
• dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1272
• dc.identifier.uri http://hdl.handle.net/10230/20735
• dc.language.iso eng
• dc.relation.ispartofseries Economics and Business Working Papers Series; 1272
• dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
• dc.subject.keyword assortment planning
• dc.subject.keyword product variety management
• dc.subject.keyword product returns
• dc.subject.keyword nested logit
• dc.subject.keyword Operations Management
• dc.title When to carry eccentric products? Optimal retail assortment under consumer returnsca
• dc.type info:eu-repo/semantics/workingPaper