Consumer Search and Product Returns in E-Commerce
American Economic Journal: Microeconomics
vol. 16,
no. 2, May 2024
(pp. 387-419)
Abstract
E-commerce has led to a surge in products being returned after purchase. We analyze product returns as resulting from a trade-off between the social waste of returns and the search efficiency gains of being able to inspect a product's value after purchase. We find whenever returns are efficient, the market generates too few returns, as the parties involved in the transaction do not internalize the welfare benefit of consumers continuing their search, generating profits for other firms. We also show, despite their consumer-friendly appearance and the private cost of returns, firms may benefit and capture the gains from less costly search.Citation
Janssen, Maarten, and Cole Williams. 2024. "Consumer Search and Product Returns in E-Commerce." American Economic Journal: Microeconomics, 16 (2): 387-419. DOI: 10.1257/mic.20230040Additional Materials
JEL Classification
- D11 Consumer Economics: Theory
- D21 Firm Behavior: Theory
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- L25 Firm Performance: Size, Diversification, and Scope
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