I n this paper, we consider a retailer adopting a "money-back-guaranteed" (MBG) sales policy, which allows customers to return products that do not meet their expectations to the retailer for a full or partial refund. The retailer either salvages returned products or resells them as open-box items at a discount. We develop a model in which the retailer decides on the quantity to procure, the price for new products, the refund amount, as well as the price of returned products when they are sold as open-box. Our model captures important features of MBG sales including demand uncertainty, consumer valuation uncertainty, consumer returns, the sale of returned products as open-box items, and consumer choice between new and returned products and possibility of exchanges when restocking is considered. We show that selling with MBGs increases retail sales and profit. Furthermore, the second-sale opportunity created by restocking returned products enables the retailer to generate additional revenues. Our analysis identifies the ideal conditions under which this practice is most beneficial to the retailer. Offering an MBG without restocking increases the new product price. We show that if the retailer decides to resell the returned items as open-box, the price of the new product further increases, while open-box items are sold at a discount. On the other hand, customers enjoy more generous refunds along with lower restocking fees. The opportunity to resell returned products also generally decreases the initial stocking levels of the retailer. Our extensive numerical study substantiates the analytical results and sharpens our insights into the drivers of performance of MBG policies and their impact on retail decisions.

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T he prevalence and widespread usage of email has given businesses a direct and cost-effective way of providing consumers with targeted discount offers. While these discounts are expected to increase the demand for the promoted products, are they effective in increasing revenues? Do they have effects beyond acting as price reductions? We study these questions using individual-level data from 70 randomized experiments run by a large online ticket resale platform. We estimate the redemption rates of the offers and also measure the broader impact of emailed promotions by comparing purchases by individuals who received the experimental promotions with purchases by those who did not receive the offers because of the experimental randomization. We find that the offers cause the average expenditure to increase significantly, by $3.03 (a 37.2% increase) during the promotion window. However, the redemption rate of these offers is low. Importantly, 90% of these gains are not through redemption of the offers. The individuals who spent more on the platform in the past are more responsive to the offers, and the effect of the offers is significantly higher among individuals who did not transact on the platform in the year before the offer was given. Interestingly, the offer causes carryover to the week after the promotion expires; we find that spending increases by $1.55 in the week after the offer expires. Additionally, we find evidence for cross category spillovers to nonpromoted products: offers not applicable to a ticket genre cause an increase in spending in that genre. We conclude that emailed offers can serve as a form of "advertising" for the firm's products, in addition to being tools for price discrimination.

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We study the alliance formation strategy among suppliers in a one downstream firm-n upstream suppliers framework. Each supplier faces an exogenous random shock that may result in an order default. Each of them also has access to a recourse fund that can mitigate this risk. The suppliers can share the fund resources within an alliance, but need to equitably allocate profits of the alliance among the partners. In this context, suppliers need to decide whether to join larger alliances that have better chances of order fulfillment or smaller ones that may grant them higher profit allocations. We first analytically characterize the exact coalition-proof Nash-stable coalition structures that would arise for symmetric complementary or substitutable suppliers. Our analysis reveals that it is the appeal of default risk mitigation, rather than competition-reduction, that motivates cooperation. In general, a more risky and/or less fragmented supply base favors larger alliances, whereas substitutable suppliers and customer demands with lower pass-through rates result in smaller ones. We then characterize the stable coalition structures for an asymmetric supplier base. We establish that grand coalition is more stable when the supplier base is more homogenous in terms of their risk levels, rather than divided among few highly risky suppliers and other low-risk ones. Going one step further, our investigation of endogenous recourse fund levels for the suppliers demonstrates how financing costs affect suppliers investment in risk-reducing resources, and consequently their coalition formation strategy. Lastly, we discuss model generalizations and show that, in general, our insights are quite robust.

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