Group for Research in Decision Analysis

Service product design and consumer refund policies

Xiao Huang John Molson School of Business, Concordia University, Canada

We consider a monopolistic firm selling to heterogeneous consumers who receive imperfect signals on their quality valuations. The firm can customize the product, customize refunds, or customize both. We show that a wide range of product design and refund policies can be optimal depending on consumer valuation heterogeneity and signal quality.

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