Li, S., Yu, J., & Zhang, M. (2024). Search Prominence with Costly Product Returns. arXiv preprint arXiv:2410.06791v1.
This paper investigates the impact of search prominence on firm profitability in a duopoly setting, considering the presence of costly product returns in an e-commerce context. The authors aim to understand how return costs influence the traditional relationship between search prominence and firm profits.
The authors develop a theoretical model using a sequential consumer search framework. They analyze consumer search and return decisions under both exogenous prices and price competition equilibrium, considering the influence of search costs and return costs.
The study challenges the traditional view that search prominence always benefits firms. It highlights the crucial role of return costs in e-commerce, suggesting that high return costs can erode the profitability of prominent firms. The authors argue that platforms should align their product return policies with their broader management objectives, considering the trade-off between advertising revenue and firm profitability.
This research provides a novel perspective on the relationship between search prominence, return costs, and firm profitability in e-commerce. It offers valuable insights for both platforms and firms in managing advertising strategies and return policies.
The study primarily focuses on a duopoly setting with simplified assumptions about match value distribution and consumer behavior. Future research could explore the dynamics of search prominence and return costs in markets with more competitors and diverse consumer preferences. Additionally, empirical studies could validate the theoretical findings and provide further insights into real-world e-commerce settings.
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by Sanxi Li, Ju... at arxiv.org 10-10-2024
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