Consumer returns policies with endogenous deadline and supply chain coordination

• We study consumer returns policies under which consumers’ valuation depends on both the refund amount and the length of the return deadline.
• An analytic model is employed to study the retailer strategies of return deadline, including return prohibition, life-cycle return and fixed return deadline.
• We put forward a new differentiated buy-back contract contingent on the return deadline to coordinate the supply chain.
• Extensions on some specific behavioral factors such as moral hazard, inertia return, and external effect are investigated.

This paper considers returns policies under which consumers’ valuation depends on the refund amount they receive and the length of time they must wait after the item is returned. Consumers face an uncertain valuation before purchase, and the realization of that purchase's value occurs only after the return deadline has passed. Depending on the product lifecycle length and magnitude of return rate, a retailer decides on strategies for that product's return deadline, including return prohibition, life-cycle return, and fixed return deadline. In addition, the influence of the return deadline on consumers’ behavior and the pricing and inventory policies of the retailer are systematically investigated. Moreover, based on the analysis of consumer return behavior on a traditional buy-back contract, we present a new differentiated buy-back contract, contingent on return deadline, to coordinate a supply chain consisting of an upstream manufacturer and a downstream retailer. Finally, extensions on some specific behavioral factors such as moral hazard, inertia return, and external effect are investigated.