Research Details

Abstract

An item is said to have been “Wardrobed” when it is bought by a consumer; used for a short time; and then returned to the store as if it were unused, for a full or partial refund -- often argued to be a nefarious or even illegal consumer practice. Since these returned products cannot later be sold as new, many retailers resort to identifying them as “open-box” items when they are put back on the retail shelf, with a concomitant requirement to lower the price of these products. If Wardrobing is really as nefarious as the above references depict it to be, we would expect retailers to prevent it from occurring by refusing to take back used products for any refund, or through some other similar mechanism. Yet, retailers do not do this. We use a game-theoretic model to analyze consumer and retailer incentives to engage in / permit wardrobing to occur and find that it benefits the retailer by allowing it to practice price discrimination among "Regular" consumers who vary in their product usage valuations. "Opportunists" who engage in Wardrobing offer the retailer the opportunity to sell to Regular consumers with lower valuations -- who now have access to a lower-priced, Wardrobed product. Wardrobing allows the retailer to recoup profits lost when pre-commitment is not possible in a new-goods, used-goods market, because of its ability to substitute price discrimination for pre-commitment benefits.

Type

Working Paper

Author(s)

Anne Coughlan, Ahmed Timoumi

Date Published

2019

Citations

Coughlan, Anne, and Ahmed Timoumi. 2019. Wardrobing: Is It Really All That Bad?.