Unlocking the return insurance puzzle in e-commerce: A strategic dance between e-sellers and the e-platform

Area of Science:

• Operations research
• E-commerce supply chain management
• Game theory

Background:

• Return insurance is increasingly common in e-commerce.
• Understanding its effects on supply chains with competing sellers is crucial.

Purpose of the Study:

• To analyze the impact of return insurance on e-commerce supply chains.
• To determine optimal return insurance policies for e-platforms and e-sellers.
• To investigate customer heterogeneity's role in return insurance strategies.

Main Methods:

• Construction of eight duopoly game models.
• Analysis of commission contracts between e-platforms and e-sellers.
• Modeling of competing e-sellers with differing product qualities.

Main Results:

• Without e-platform return insurance, retailers set premiums and strategies based on commission, compensation, and return rates.
• Retailers can lower prices to let consumers self-select return insurance.
• E-platform-offered return insurance negatively affects high-quality sellers' profits and platform revenue.

Conclusions:

• E-platform return insurance policies can disrupt optimal strategies for sellers.
• The introduction of return insurance by the platform may not benefit all parties involved.
• Careful consideration of return insurance implementation is needed to avoid unintended negative consequences.