There is now an extensive theoretical literature investigating optimal inventory policies for retailers. Yet several recent reviews have recognized that these models are rarely applied in practice. One explanation for the paucity of practical applications is the difficulty of measuring how...

When a firm allows the return of previously purchased merchandise, it provides customers with an option that has measurable value. Whereas the option to return merchandise leads to an increase in gross revenue, it also creates additional costs. Selecting an optimal return policy requires...