Product returns, asymmetric information, and firm performance

There has been a scarcity of research that studies the value of product return information to supply chain firms. In this research, we assume that the online retailer has the product return information but the manufacturer does not. Our results show that a two-part price contract can motivate the online retailer to share its private information only under certain condition, but the revenue sharing contract plus profit split mechanism always is a valuable strategy to be utilized to seek sharing the online retailer's private information and create a Pareto result. Particularly when the product is highly compatible with online sales, the manufacturer has a strong motivation to seek sharing the online retailer's information. A follow-up empirical study investigates what information can be used to predict product returns and is valuable to be shared with the manufacturer. Through sharing the product return information, both the manufacturer and the online retailer can achieve a higher performance.