An Analysis on Probabilistic Selling with Customer Returns

Probabilistic selling is a marketing strategy in which a multi-item seller provides buyer with an option to purchase for less by accepting an uncertainty risk in getting a random item from a set of multiple distinct items. However, previous studies on this strategy assume that no return is allowed, partly because return policy will shift part of the mentioned uncertainty risk back to the seller. Since return policy is a common business practice and an important coordination tool in supply chain, this research will study the impacts of return policy on the effectiveness of probabilistic selling model.