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Marketing Department's Lecture

Topic:     Does the Adoption of a Full Refund Policy Payoff for Advance Selling Platforms?

Speaker:Tianfu,Wang(the Krannert School of Management, Purdue University)

Time:      14:00,Nov.2,2017

Place:     Room706,Mingde Bussiness Building

Abstract:

Advance selling platforms (e.g., Groupon) gain revenue by selling electronic vouchers online that consumers can redeem for service. Consumers face valuation uncertainty when prepaying for advance selling deals. The uncertainty becomes a salient problem for consumers because the platforms often adopt restrictive refund policy. Such policy could “lock in” consumers but may also prevent them from making commitments. On the other hand, a liberal refund policy may lead to more prepayments and excessive cancellations at the same time. Whether a liberal refund policy is beneficial to the advance selling platform is unclear. This paper exploits a refund policy shift of an advance selling platform. This unique setting allows us to investigate this question with a quasi-experiment design empirically. We find evidence that after adopting a full refund policy, the increase in consumer prepayments outweighs the increase in cancellations. The increase in net redemptions generates higher revenue for the platform. The empirical analysis suggests that adopting a full refund policy that mitigates consumer uncertainty is beneficial to the advance selling platform.

BIO:

Tianfu Wang is a Ph.D. candidate at the Krannert School of Management, Purdue University. He holds a master’s degree from the University of Rochester, a master’s degree from the University of Illinois, and a bachelor’s degree from Peking University. His primary research field is quantitative marketing. His research focuses on using both field and quasi-experiment methods to study the consumer response to the marketing mix and policy changes.