This paper investigates the pricing and restocking fee decisions of two competing firms selling horizontally differentiated products. We model a duopoly facing consumers who have heterogeneous tastes for the products and who must experience a product before knowing how well it matches with their...

Consumers often return a product to a retailer because they learn after purchase that the product does not match as well with preferences as had been expected. This is a costly issue for retailers and manufacturers--in fact, it is estimated that the U.S. electronics industry alone spent $13.8...