Happy Returns

Has anybody pondered the very important subject of why it is much easier to return a purchase in the United States than it is in Europe? Neither have I, but Alex Tabarrok has and he talks about it in his post called "Why so many happy returns?" in Marginal Revolution.

His ideas are a spin off of the old joke that the Germans are very nice people until you try to buy something from them. Tabarrok looks at, what he calls, this "return puzzle" from two different theories: the demand theory and the supply theory.

The demand theory suggests that because incomes are lower in Europe, maybe people of lower income don't demand easy return policies. Tabarrok contests this and says that, since easy return policies are a form of an insurance policy, low-income poeple would be more likely to demand them than not, and there would be similar demands in countries such as Sweden, if this were correct, which there are not.

The Supply theory suggests that it might be cheaper for U.S. firms to offer easy returns than it is for European firms since they are larger and can take advantage of economies of scale. Tabarrok contests again and says that, if this is true, then why aren't U.S. international firms offering easy return policies in Europe.

I, personally, think that the supply theory has more validity because it is cheaper for U.S. firms to offer easy return policies in the U.S. but would it be just as cheap for the same U.S. firm to offer the same policy in Germany? I don't think it would. Maybe there are different opportunity costs involved in Germany if they choose to go with an easy return policy there versus here.

No comments: