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Customer return policies for experience goods: the impact of product price and consumer search costs on seller-provided informational cues

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The present article provides an extension of previous theoretical arguments regarding customer return policies for experience goods. Logit regressions presented here suggest the importance of the 'full cost' to consumers of a purchase mistake, as proxied by experience goods prices and the time costs to consumers associated with search, in the seller's decision to produce information in advertisements regarding return policies. The evidence points out that sellers do respond in their decisions to produce information in a manner that reduces the total cost of voluntary exchange and maximizes seller profits.

Document Type: Research Article


Publication date: March 1, 1999

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