To understand whether retailers should consider consumer returns when merchandising, we study how the optimal assortment of a price-taking retailer is influenced by its return policy. The retailer selects its assortment from an exogenous set of horizontally differentiated products. Consumers...

The return of a product is often one of a series of transactions that a consumer undertakes in search of a good. Recognizing this, we analyze returns as part of a product search process: Upon returning a product, consumers may immediately purchase an alternative one, which they may later replace...