Competition among supply chains: Implications of full returns policy

We examine decisions of retailers and manufacturers in two competing supply chains selling a substitutable product, with demand uncertainty, when manufacturers offer or do not offer full returns policies. We consider retailers' two pricing strategies, optimal pricing and clearance pricing, and we find that full returns policies have different implications in the presence of chain-to-chain competition as compared to the case of a monopoly supply chain. The conditions under which manufacturers and retailers prefer or not prefer full returns policies are identified.