We study the pricing and return policy decisions of an omnichannel retailer serving customers who differ in how they realize their uncertain valuation for a product—by inspecting in store before purchase or by purchasing online and possibly returning misfit products. Customers may return misfit products either to stores for a full refund or online as per the firm’s return policy. We model prices to be identical across channels, allow crosschannel returns, and endogenize customers’ purchase and return decisions, capturing typical features of an omnichannel setting. Our analysis helps explain why some omnichannel firms choose full refunds, whereas others charge a fee for online returns. We find that omnichannel firms with good salvage partners for online returns (e.g., Nordstrom) as well as those with more store-based customers (e.g., Macy’s) should offer full refunds. Similarly, firms are incentivized to offer full refunds for products that customers are more likely to inspect in store (e.g., Express for footwear). In contrast, firms with a significant store network and better in-store salvage opportunities (e.g., J.C. Penney) might be better off charging a fee for online returns in order to nudge customers to return in store. Finally, an omnichannel firm should be cautious both in making the return process more convenient and in improving accessibility to its stores, because these seemingly beneficial policies, if combined with a partial-refund policy, could undermine the firm’s overall profit. This paper was accepted by Vishal Gaur, operations management.
Problem definition: We study service systems where some (so-called “redundant”) customers join multiple queues simultaneously, enabling them to receive service in any one of the queues, while other customers join a single queue. Academic/practical relevance: The improvement in overall system performance due to redundant customers has been established in prior work. We address the question of fairness—whether the benefit experienced by redundant customers adversely affects others who can only join a single line. This question is particularly relevant to organ transplantation, as critics have contended that multiple listing provides unfair access to organs for patients based on wealth. Methodology: We analyze two queues serving two classes of customers; the redundant class joins both queues, whereas the nonredundant class joins a single queue randomly. We compare this system against a benchmark wherein the redundant class resorts to joining the shortest queue (JSQ) if multiple queue joining were not allowed, capturing the most likely case if multilisting was prohibited: Affluent patients could still afford to list in the region with the shorter wait list. Results: We prove that when the arrival rate of nonredundant customers is balanced across both queues, they actually benefit under redundancy of the other class—that is, redundancy is fair. We also establish that redundancy may be unfair under some circumstances: Nonredundant customers are worse off if their arrival rate is strongly skewed toward one of the queues. We illustrate how these findings apply in the organ-transplantation setting through a numerical study using publicly available data. Managerial implications: Our analysis helps identify when, and by how much, multiple listing may be unfair and, as such, could be a useful tool for policy makers who may be concerned with trying to ensure equitable access to resources, such as organs, across patients with differing wealth levels.
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