Release Time:2019-03-11  Hits:

Indexed by: Journal Article

Date of Publication: 2017-09-01

Journal: ELECTRONIC COMMERCE RESEARCH AND APPLICATIONS

Included Journals: SSCI、EI、SCIE、Scopus

Volume: 25

Page Number: 16-28

ISSN: 1567-4223

Key Words: Return-freight insurance; Online product review; Product fit uncertainty; Return policy

Abstract: To resolve online shopping disputes with product return, some insurance companies have developed a new type of insurance called return-freight insurance to compensate consumers' loss of return-freight fees. Traditional insurance-premium determination (such as support vector machines) has not fully merged all e-commerce factors, such as the product-fit uncertainty of online shopping, that could affect both insurance demand and return quantity. Based on these traits, we develop a profit-maximization model in terms of certain market-reaction parameters, especially product-fit uncertainty, and calculate the optimal pricing strategy, including both the insurance premium and the compensation. Using prospect theory, we explain why online product review could influence insurance applicants' risk-averse behavior in the e-commerce situation. Then we solve for the reasonable premium and compensation given online product reviews from the insurance company's perspective and obtain a number of managerial guidelines for using marketing and operational-strategy variables to influence those reaction parameters so as to obtain the maximum benefit from the market. Interestingly, when consumers' sensitivity to product-fit uncertainty is moderate, an increase in product-fit uncertainty moves insurance premium and compensation in the opposite direction. (c) 2017 Elsevier B.V. All rights reserved.