A partial-refund policy is superior to a "full money-back policy when
a seller faces a significant amount of opportunistic return behavior-i.e.,
consumers order a product for short term usage only to return it for a
refund later. In a partial-refund policy, the seller charges a rent (the
nonrefundable portion of price) to those who return the product; this
discourages opportunistism, but also penalizes consumers who only
return because merchandise is unsatisfactory. The optimal partial
refund policy balances this tradeoff. Profit is higher under the partial
refund policy because of a lower number of returns and because a
higher price can be charged. Mail-order clothing and personal computer
industries demonstrate that catalogers typically offer only partial
refunds
