Consumer Search and Product Returns in E-Commerce

Janssen, Maarten; Williams, Cole

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 that 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 that, despite their consumer friendly appearance and the private cost of returns, firms may benefit and capture the gains from less costly search.

Citation

Janssen, M., & Williams, C. (2024). Consumer Search and Product Returns in E-Commerce. American Economic Journal: Microeconomics, 16(2), 387-419. https://doi.org/10.1257/mic.20230040

• Journal Article Type: Article
• Acceptance Date: Sep 5, 2023
• Online Publication Date: May 8, 2024
• Publication Date: 2024-05
• Deposit Date: Oct 9, 2023
• Publicly Available Date: May 8, 2024
• Journal: American Economic Journal: Microeconomics
• Print ISSN: 1945-7669
• Electronic ISSN: 1945-7685
• Publisher: American Economic Association
• Peer Reviewed: Peer Reviewed
• Volume: 16
• Issue: 2
• Pages: 387-419
• DOI: https://doi.org/10.1257/mic.20230040
• Public URL: https://durham-repository.worktribe.com/output/1787618