Pricing Decisions with Product Return and Consumer Fit Uncertainty

Aditya Nugroho, Chung Chi Hsieh

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

When firms introduce new products to the market, consumers usually have product fit uncertainty towards these new products and may not fully understand their characteristics before purchasing them. It is thus prevalent that firms offer product returns in order to mitigate consumers' valuation risk. The objective of this study is to develop a two-period model with product return and investigate how consumers' fit uncertainty and product knowledge affect the firm's decisions and profit. The firm sells new products in the first period and refurbishes the returned products and sells them, along with the new products, in the second period. We find that when more consumers find product fit or when more consumers understand product characteristics, the quantity of returned products will be reduced, the selling prices of the products will be lowered, and the firm's profit will be increased. On the other hand, when consumers have higher product valuation in the second period, the quantity of returned products will be reduced, the first-period selling price of the product will be lowered and the firm's profit will be lowered.

Original languageEnglish
Title of host publication2019 IEEE International Conference on Industrial Engineering and Engineering Management, IEEM 2019
PublisherIEEE Computer Society
Pages185-188
Number of pages4
ISBN (Electronic)9781728138046
DOIs
Publication statusPublished - 2019 Dec
Event2019 IEEE International Conference on Industrial Engineering and Engineering Management, IEEM 2019 - Macao, Macao
Duration: 2019 Dec 152019 Dec 18

Publication series

NameIEEE International Conference on Industrial Engineering and Engineering Management
ISSN (Print)2157-3611
ISSN (Electronic)2157-362X

Conference

Conference2019 IEEE International Conference on Industrial Engineering and Engineering Management, IEEM 2019
CountryMacao
CityMacao
Period19-12-1519-12-18

All Science Journal Classification (ASJC) codes

  • Business, Management and Accounting (miscellaneous)
  • Industrial and Manufacturing Engineering
  • Safety, Risk, Reliability and Quality

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  • Cite this

    Nugroho, A., & Hsieh, C. C. (2019). Pricing Decisions with Product Return and Consumer Fit Uncertainty. In 2019 IEEE International Conference on Industrial Engineering and Engineering Management, IEEM 2019 (pp. 185-188). [8978506] (IEEE International Conference on Industrial Engineering and Engineering Management). IEEE Computer Society. https://doi.org/10.1109/IEEM44572.2019.8978506