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| Study on Freight Insurance Decision Making with Consideration of Strategic Consumer Returns in the Pre-Sale |
| HE Yingying，GUO Chunxiang |
| Sichuan University, Chengdu, China |
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Abstract Based on the consumer’s strategic behavior, this paper builds a mathematical contrast model about the return freight insurance, studies the pre-sale strategy and the decision-making of the return freight insurance of the newsvendor retailer under the uncertainty of the consumer’s valuation, and obtains the optimal discount coefficient and the optimal refund. The following conclusions are obtained through the numerical simulation with Matlab that whether the retailer buys the return freight insurance for the advance consumers, the optimal refund equals to the unit cost of the products. And after buying freight insurance, the retailer can set a higher advance price and reduce the inventory risk. Only when the return freight is within a very small range, the retailer’s purchase of freight insurance may cause losses, but in most cases, purchase will bring a huge profit to the retailer.
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Received: 25 December 2017
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