Premium
Politiques de remboursement, résultats du marché et bien‐être du consommateur .
Author(s) -
Chesnokova Tatyana
Publication year - 2007
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/j.1365-2966.2007.00409.x
Subject(s) - welfare , reliability (semiconductor) , economics , competition (biology) , consumer welfare , product (mathematics) , rate of return , microeconomics , finance , market economy , ecology , power (physics) , physics , geometry , mathematics , quantum mechanics , biology
. The effect of return policies on market outcomes is studied in a model where consumers differ in their valuations of time. Product reliability is identified with defect rates. Producers first choose reliability levels and then compete in prices. For given defect rates, allowing returns makes products closer substitutes, enhancing competition and reducing prices. Being closer substitutes makes higher reliability less worthwhile, which reduces reliability. While the decrease in reliability reduces consumer welfare, the decrease in prices raises it. The latter dominates, so that aggregate consumer welfare increases with return policy.