Return Freight Insurance: Implications for Online Platforms, Third-party Retailers and Consumers

Yiming Li, Gang Li, T. C.E. Cheng

Research output: Chapter in book / Conference proceedingConference article published in proceeding or bookAcademic researchpeer-review

1 Citation (Scopus)

Abstract

In this paper, we investigate the effect of return freight insurance (RFI) in an online platform setting where two competing third-party retailers provide RFI to consumers. First, we find that RFI generally increases the price level on the platform. Second, we find that when retailers have same base return rates, retailers' profits are not changed while the platform's profit is increased. Whereas, when retailers have different base return rates, RFI only benefits the retailer with high base return rate and harms the retailer with low base return rate, and RFI benefits the platform if and only if the product differentiation degree is relatively large. Third, we find RFI increases customer surplus if RFI's return hassle cost reduction (HCR) and/or willingness-to-pay enhancement (WTPE) effect is relatively strong. Moreover, we find RFI increases social welfare if RFI's HCR and/or WTPE effect is relatively strong and the product differentiation degree is relatively large. Such findings offer guidelines for online platforms and third-party retailers to design appropriate RFI provision strategies.

Original languageEnglish
Title of host publication8th International Conference on Logistics, Informatics and Service Sciences, LISS 2018 - Proceeding
EditorsXiaopu Shang, Guowei Hua, Dash Wu, Runtong Zhang, Juliang Zhang, Anqiang Huang
PublisherInstitute of Electrical and Electronics Engineers Inc.
ISBN (Electronic)9781538669655
DOIs
Publication statusPublished - 27 Dec 2018
Event8th International Conference on Logistics, Informatics and Service Sciences, LISS 2018 - Toronto, Canada
Duration: 3 Aug 20186 Aug 2018

Publication series

Name8th International Conference on Logistics, Informatics and Service Sciences, LISS 2018 - Proceeding

Conference

Conference8th International Conference on Logistics, Informatics and Service Sciences, LISS 2018
CountryCanada
CityToronto
Period3/08/186/08/18

Keywords

  • Game theory
  • Online platform
  • Online retailing
  • Return freight insurance
  • Return policy

ASJC Scopus subject areas

  • Strategy and Management
  • Computer Networks and Communications
  • Information Systems and Management
  • Control and Optimization

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