Joint determination of the optimal selling price, refund policy and quality level for complementary products in online purchasing

Abstract

Recently, companies have an increasing interest in online purchasing or e-shopping. However, in this type of buying the customer cannot validate the quality of the products. Thus, they trust in the return policy as a signal of a good quality. If the customers are not satisfied then they can return the products and refund their money back. This research deals with the problem of joint determination of the optimal selling price, refund policy and quality level for complementary products in an online purchasing. It is assumed that the demand of each product is a function of price, refund and quality level. Furthermore, return policy is also a function of refund and quality level; and return quantity of the products is affected by the return quantity of the other product. The profit maximisation model is illustrated with a numerical example. [Received: 12 February 2015; Revised: 25 August 2017; Accepted: 31 January 2018]

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